The bulls are at it again as major US indexes continue their
relentless ascent into previously uncharted territory, with the
S&P 500 Index
(INDEXSP:.INX) flirting right around the milestone 1,700 mark.
Despite a few worrisome reports from bellwethers
), corporate performance results have largely come in
better-than-expected, especially on the financials front; upbeat
operating results and optimistic outlooks from big banks including
Bank of America
) have helped to reignite euphoria on Wall Street following the
recent stimulus fear induced pullback.
With the bulls still in the drivers seat and most securities
sitting on hefty gains YTD, many are hesitant to jump in long
because the next correction feels like it's just around the corner.
As such, below we highlight three commodity stocks that may offer
an attractive short selling opportunity for those looking to bet
against some of the stellar run-ups already seen across Wall
The stocks included here are deemed to be great
for three reasons; first and foremost, each of these companies
boasts a market cap upwards of $10 billion along with average daily
trading volumes topping the $1 million mark, in an effort to weed
out smaller, more volatile, trading prospects.
Second, these securities are trading below their 200-day moving
averages, thereby implying that they are in longer-term downtrends.
Lastly, these stocks are also trading above their five-day moving
averages, which makes them attractive for swing traders looking to
sell short before they resume their downtrend. As always, investors
of all experience levels are advised to use stop-loss orders and
practice disciplined profit-taking techniques:
Consider NEM's one-year daily performance chart below. This
Colorado-based gold miner has been rallying over the past week, but
don't let this bullish price action trap you; notice how this stock
has been steadily falling since peaking at $57.93 a share, managing
to post lower-highs and lower-lows while failing to summit its
50-day moving average (blue line) in virtually every instance.
Given the clear downtrend at hand, we advise taking a short
position as long as NEM fails to hold above the 50-day SMA.
Click to Image Enlarge
Consider PBR's one-year daily performance chart below. This
Brazil-based energy bellwether has been stuck in a dismal downtrend
since the end of 2009; PBR has been oscillating around its 50-day
moving average, which has remained well underneath the 200-day
moving average (yellow line), showcasing the long-term nature of
this downtrend. Traders should wait and see how PBR behaves as it
inches closer to its 50-day SMA; if PBR stalls around the $16 mark,
jumping into a short position will make sense as it will likely
retest its lows near the $12 level.
Click to Image Enlarge
Compania Vale Do Rio
Consider VALE's one-year daily performance chart below. This
Brazil-based miner crossed below its 200-day moving average in late
February of this year and has since failed to regain any meaningful
bullish momentum. VALE has been making lower-highs and lower-lows
while failing to re-summit the 50-day SMA in virtually every
instance; as such, another failed attempt here should offer a good
opportunity to get short before the stock retests $13 a share.
Click Image to Enlarge
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Editor's note: This article by Stoyan Bokinov was originally