There's been increased chatter lately that if you're shorting
stocks now, you're late to the game. In some cases, that's true;
but plenty of compelling short setups remain that could offer
more downside in coming weeks.
Sure, the market's oversold and will probably bounce at some
point between now and the end of the year, but it most likely
won't amount to much more than a short-term tradable rally. A lot
of technical damage has been done to the market that will take
more time to repair. The three-year plus bull market is long in
the tooth and new leadership needs more time to come into
In an environment like this, it makes sense to continue to
look for profit opportunities on the downside.
When building a list of short ideas, focus on growth stocks
that have made huge price runs already or those . There are
plenty to choose from, including Priceline.com (Nasdaq:
), Ulta Beauty (Nasdaq:
), Lululemon Athletica (Nasdaq:
) and Under Armour (NYSE:
), among others.
The one that looks the most vulnerable is Priceline after a
more than 1,200 percent move since October 2008. A series of
lower highs and dry-up in buying demand points toward a stock
that could be ready to pay a visit to its last breakout area
Shares of Priceline gapped up on November 2 on strong earnings
but the enthusiasm was short-lived as sellers came into the
stock. After early strength, it finished near its session low in
heavy volume. Sellers have been in the stock ever since and
Priceline is starting to meet with resistance at its 40-week
moving average. I'm not seeing unequivocal signs of institutional
selling in Priceline yet, but it looks like a tired stock.
It's been said in the past that fundamentals often look the
best at or near a stock's top. From a fundamental perspective,
earnings prospects still look pretty good at PCLN, but sales
growth has been decelerating in recent quarter and continued
weakness in Europe in 2013 could weigh on results going forward.
Clearly the company is looking for new growth opportunities as
evidenced by its recent acquisition of Kayak Software (NASDAQ:
). Part of its recent weakness is because is due to concerns
about slowing growth in coming quarters. The concerns are
A quick market rally could see Priceline rise to its 40-week
moving average around $648, but I suspect this level will
ultimately be a significant resistance level for the stock. All
great price runs eventually come to an end, and it could be
happening now with Priceline. When a new market uptrend begins in
earnest, former leaders like Priceline will likely be left
behind, replaced by a new crop of leaders still in the early
stages of growth.
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