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Bearish Sectors (video)

This is a follow-up to the Bullish Sectors video published on Tuesday. This video takes a look at some of the more bearish sectors that might provide attractive shorting opportunities as either a pure-play short or a hedge to long exposure with a trading or investing account. These sector ETFs are discussed in the following order: XBI, IBB, PBE, XLV, XLB, XLU, AA (an individual stock within the basic materials sector, XLK and XLF.

Note: These are only unofficial trade ideas at this time although the ticker symbols will appear under the Short Trade Setups category.

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Apr 22, 2016 1:07pm|Categories: Equity Market Analysis, Unofficial Short Ideas|Tags: , , , , , , , |3 Comments

3 Comments

  1. ben711 April 22, 2016 1:37 pm at 1:37 pm

    Randy, could you clarify your view on AA
    http://rightsideofthechart.com/aa-alcoa-inc-trade-idea/

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    • rsotc April 22, 2016 2:39 pm at 2:39 pm

      ben- My thoughts on AA, which align with my thoughts on the basic materials sector (XLB) which was also discussed in the video is that while I remain longer-term bullish on the sector, I am near-term & intermediate-term (days to weeks or even several months) bearish on the stock. In the video I had cited the recent bullish breakout above that trading range but stated that it appears to me that the breakout in both XLB as well as AA (which is one of the top components of XLB) is likely to fail in the near-future.
      Essentially, there are a few options on how to position short on AA if you agree with my analysis. The most aggressive option would be to short a partial or full position here in anticipation that the breakout will fail, although there aren’t any sell signals to support that entry, only the overbought nature of the stock as well as the potential divergent high. The next option would be to wait for a break of that uptrend line that I drew on the daily chart and just beyond that, lies the top of that trading range which I highlighted with the rectangular box. One could wait for prices to fall back within that range before adding to a starter position or opening a new short position. The first & most probably target would be the bottom of that zone which comes in around 9.15.

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    • rsotc April 22, 2016 2:45 pm at 2:45 pm

      Ben- Let me add to my reply that it would be prudent to scrub any individual stocks that you are considering for a trade for their earnings date. We are thick into earnings season now & you run a elevated risk of getting caught on the wrong side of a gap if taking a stock shortly before they report earnings. Shorting a sector ETF, such as XLB, in lieu of trading individual basic material stocks such as AA will greatly mitigate that risk through the diversification provided by the ETF.

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