In the midst of this market meltdown almost every stock looks like a great short. Tonight I just want to throw out some specific 6 month charts that I think demonstrate the scale of the collapse and offer big opportunities on the downside. I will start with charts that look the worst and then show you better looking situations. The result will be that the more conservative (lower risk, lower reward) plays are first then I'll get to the really aggressive (higher risk, huge reward potential) ideas. Be sure to click on each chart to see the details of my thoughts on the charts including support, resistance and targets. These are the days that bears wait years for, enjoy!Sears Holdings/ Kmart (SHLD):
Home Depot (HD):
Fannie Mae (FNM):
Bank of America (BAC):
Intel (INTC):
Google (GOOG):
And my favorite of all shorts in the entire market right now is FSLR. Not only do I think that wallstreet has this stock fundamentally wrong, its also gone up a ton with few pullbacks to create support. I'm looking for a $100 drop in this stock in a short period of time.
First Solar (FSLR):
Just one cautionary note. When things look worst that is usually the best time to take profits on shorts and things look pretty bad right now. I am of the mind that we began a new scale of decline last Friday and things are about to look much, much worse. I have been wrong before though and I am constantly worried of some emergency move by Bush, Paulson and Bernanke to try and wipe out shorts. They have done things like emergency rate cutes before and I expect the bulls to go down kicking and screaming. So just be on your guard and take profits casually on the way down while aggressively shorting the rallies. Its time to start acting like bears!
Disclosure: I own BAC, FNM and FSLR puts and I wish I had puts on all of these.
3 comments:
SHLD - crap retailer that, as far as I can tell, has been held up by its balance sheet, mainly the presumed value of its real-estate. After the late-day action today, I will wait; but I agree it is an attractive short, and one I made money on in 2007.
HD - little upside it would seem, but a beaten down marquee name and so I am a little wary.
FNM - with the GSEs you gotta be careful. Wish I'd gone short 40 bucks ago. Still enough downside to be interesting (probably).
BAC - stupid investment in CFC (so far) makes you think they must be idiots and so makes you want to bet against them. For the financials I have mostly traded SKF so far, but I missed some good individual shorts as a result. More downside here too but with such a beaten down sector I am cautious.
INTC - with AMD melting away cannot see shorting INTC at this level but I hear laptop demand at Xmas was disappointing, and that's what's been driving CPU sales. A tech cyclical that just might keep cycling down. As a tech short I like JNPR better right now.
GOOG - I made a good deal riding it up. Would have to work up the courage to short it, and if that's the case I will probably pass.
FSLR - what a roller coaster today. Smells like a valuation short, and those do not always work, even in a down market. And with all the 'technology of the future' talk I am a bit wary here. Will be interesting to see if today's recovery/rally continues tomorrow; if so, I will take more interest.
When things look worst that is usually the best time to take profits on shorts and things look pretty bad right now.
Good point - something to keep in mind. I was a bit frustrated last year at times due to my failure to trade - to close out profitable positions before some of that profit vanished. I will try to do that more this year. But then you have the challenge of finding new ones.
You seem to be very much a technicals guy, and while I like some of that as well I could never rely too much on it, although shorting seems to be in my blood.
Nice post and good luck.
Please keep in mind the date of that post. His position has changed quite a bit since the 6th, as he trades.
And he posts his trades in live chat, as do I, if you would like to join us...
Thanks for your thoughts on those stocks eh. Clearly, some of those stocks must have major issues behind the ticker if people are selling so aggressively.
"You seem to be very much a technicals guy, and while I like some of that as well I could never rely too much on it, although shorting seems to be in my blood."
Yes, I have to really work on making my trading based on technicals and not fundamentals which is human nature. Fundamentals are good for knowing what stocks to watch but technicals are the only way to trade, in my opinion. Great stocks go down and really bad ones go up, so I just look for nice setups and try to look at charts objectively.
As far as my position on the market, I agree with xerxes:
http://stockgeometry.blogspot.com/2008/01/market-bottom-for-now.html
The market is due for a bounce and I sold all of my puts except on FNM. I am now long WFR heavily, short some CFC puts and holding a bunch of cash for opportunities.
You are more than welcome to join us in chat where I post all of my trades.
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