Monday, December 29, 2008

Declining 50 Day Moving Averages

Its easy to make a case for the bears right now since the underwhelming Santa rally has run out of steam at the 50 dma. In the small caps above you can see sell signals showing up as well. The fact of the matter is, in a long term downtrend the declining 50 dma is a low risk place to enter shorts (low risk because you just cover if prices overtake the 50 dma). It certainly is still possible that some upside momentum might be salvaged for an early 2009 rally but every day we spend below the 50 dma the odds get lower. Its time to look into opportunities on the short side and here are a few that popped onto my screen this morning:

I know its hard to short a stock at 10$ that was over a $100 a year ago. But DRYS was also $3 a few weeks ago. I think it could go back there.

This CSX pattern is a nice clean break, the trangle targets roughly $15. Note that the break occured today and the market is not closed yet.

SHLD is more of an example than something I would actually short, notice how the stock is so weak that it can't even reach the 50 dma.

Good luck!

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