(By Rich Bieglmeier)It's tough sledding out there for investors on the buy side. Stocks indexes are down more than 1.5% after getting Benned over yesterday. Unfortunately, as iStock scans through the charts of the favorite stocks of our readers, we see a lot of bearish engulfing patterns – usually a sign prices could go lower.
A bearish engulfing signal is a candlestick pattern where the day's range – high to low -swallows the previous few days high to low price.
The key will be where do stocks open tomorrow. If equities cross below today's lows, it could be a sign of reversal – at least short-term, anyway.
If the markets correct, investors can buy inverse ETFs like ProShares Short QQQ (PSQ) to profit. However, if the NASDAQ bounces, PSQ will lose money. That's why we also consider shorting stocks. Weak companies can continue to fall even if the indexes go green.
iStock has identified four short ideas that could trade much lower in the days ahead.
All four have put their foot through a floor of support and hitting new lows.
Cabot Microelectronics Corp.
) had solid support around $30, dating back to 2009. The break-wall was washed away by today's red tape. We can see the integrated circuits maker falling to $25ish. If CCMP closes above $30, it's time to cover.
Deckers Outdoor Corp.
) is another that's traveling to new depths. This morning, the footwear maker made support at $47 disappear quick as quick. The breach puts DECK in danger of saying hello to $40. iStock suggests a stop loss if DECK closes above it breakdown point of $47.
) assaulted its support at $20.50. The Dow Jones member is likely to test $17.50, maybe even $15 if the stock market continues to flounder. There is still plenty of legs pace remaining before HPQ hits an oversold RSI reading, and a bearish MACD cross-under could help it get lower faster. Again, we suggest using the previous support level as your stop guide.
) is the second footwear company to make our short-able list. The just do-it company's stock price isn't doing it, going up that is. Shares just did break below the psychological and actual support level of $100. The 10-year NKE stock chart shows the next staging area to be close to $90. You probably already know, $100 is our stop suggestion.
Shorting is always a tricky endeavor for folks who are unfamiliar with the practice.
Make sure you check with your investment professional to understand the risks and cost. You might even think about buying put options if shorting is too uncomfortable for you, just don't put in more than you can afford to lose.