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Watchlist Update: Weak Stocks Can Always Become Weaker

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The selling continues…

Last week, I shared why I was bearish on the market and expected stocks to continue lower. 

Unsurprisingly, that is exactly what happened.

The Nasdaq and S&P 500 each fell roughly 6%. And BTC dropped another 22% last week!

If you’re new to trading and haven’t experienced one yet, this is what happens in a bear market. It can get ugly in a hurry.

That’s why I’ve been pounding the table since last year telling folks not to get aggressive and remain mostly in cash.

Digging In

I held a webinar on Tuesday for my Stealth Trades members where I talked about a few under-the-surface breadth indicators I am watching to signal when the market has bottomed.

And I want to share a bit of that with you today…

The Nasdaq is currently giving oversold readings, which under normal circumstances can lead to a short-term bounce.

But in severe bear markets like this one, stocks will often remain oversold for longer than usual.

Daily Chart of Nasdaq Composite with Breadth Indicators – Source: TradingView

Less than 15% of stocks are above their 200-day moving average, and even the strongest groups like chemicals, shipping and energy have broken down and sold off.

The only surprising thing to me is the put/call ratio. Markets tend to bottom at the point of maximum pain.

When the last bull finally capitulates and sells… 

When the diamond-handed, “hold on for dear life” boys finally throw in the towel… 

And the financial news is screaming recession… That is usually the bottom.

No Crystal Ball

I don’t pretend to know how low the market will go or where the bottom will be. In fact, you should be skeptical of anyone who claims they do.

All we can do is listen to the market and trade with the prevailing trend. One day that trend will be up. But right now, it is unquestionably down.

And for those of you tempted to buy here because stocks look “cheap,” remember that they can always get cheaper.

With that in mind, here is my Watchlist for this week. It shouldn’t be surprising that they are all short trades…

The Boeing Company (Short Idea)

The Boeing Company (BA) has been trending lower since last March – 10 months before the bear market even started.

Here’s how the chart is setting up…

Daily Chart of The Boeing Company (BA) – Source: TradingView

And here’s how the stock is setting up with my Stock Surge Indicator (SSI)…

  • Surge score: 24/100
  • % Above 52-wk low: 18%
  • Sales growth: -8%
  • Return on Equity: N/A
  • Triple momentum: yes (short)

Sales are declining, and the company is losing money hand-over-fist. Institutions have also been exiting the stock for the last four quarters.

Regular readers know I prefer to short weak stocks when they bounce up into resistance – preferably a downtrend line or major moving average.

BA is roughly 7% below its 50-day moving average, which will likely serve as resistance for the stock.

Traders may consider selling BA short in the $135-$145 range using a 10% stop for protection.

JD.com, Inc. (Short Idea)

JD.com, Inc. (JD) is a Chinese retailer offering a wide variety of products via their website and mobile app.

Basically, it is China’s version of Amazon… only not nearly as good.

Here’s how the chart is setting up…

Daily Chart of JD.com, Inc. (JD) – Source: TradingView

And here’s how the stock is setting up with my SSI…

  • Surge score: 70/100
  • % Above 52-wk low: 58%
  • Sales growth: +22%
  • Return on Equity: 9%
  • Triple momentum: no

I’ll admit to being a bit biased on this one because I strongly dislike Chinese stocks.

I have seen too many rug-pulls, ghost companies and too much outright fraud from Chinese companies to have any real faith in their stocks that trade on our exchanges…

Not to mention the government’s history of nationalizing private industries and just generally hating US investors.

That being said, the stock is a textbook short setup…

After a severe decline, JD bounced into its 200-day moving average, which will likely act as resistance.

Consider selling JD short here with a buy stop near $69.

ZIM Integrated Shipping Services Ltd. (Short Idea)

ZIM Integrated Shipping Services Ltd. (ZIM) is a stronger stock than I typically look to short, but I believe this is the beginning of the end for ZIM.

Here’s how the chart is setting up…

Daily Chart of ZIM Integrated Shipping Services Ltd. (ZIM) – Source: TradingView

And here’s how the stock is setting up with my SSI…

  • Surge score: 93/100
  • % Above 52-wk low: 106%
  • Sales growth: +113%
  • Return on Equity: 191%
  • Triple momentum: no

The stock has been a market leader in 2022 as marine shipping companies have been able to charge insane rates due to slowdowns in the supply chain.

Earnings surged roughly 10-fold after the pandemic, and the stock has done the same.

But President Biden basically declared war on ZIM and the other handful of companies that control the bulk of cargo shipments from overseas thanks to what the White House believes is “price gouging.”

After an 803% move higher in 2021 and early 2022, ZIM has finally started rolling over.

Shares have seen heavy selling volume over the last few weeks, and the stock is now resting on its 200-day moving average for the first time ever.

If ZIM breaks below $47, I would consider selling it short with a buy stop at $52. 

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Embrace the surge,

Ross Givens
Editor, Stock Surge Daily

The post Watchlist Update: Weak Stocks Can Always Become Weaker appeared first on Stock Surge Daily.

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