Some Favorite Shorts

The market seems to be back into "wait and see" mode as crude oil prices reach never-before-seen levels yet the outlook on the economy remains very optimistic. Some long positions I've suggested - KYPH in particular - continue to do well. I thought I'd mention three short positions I currently have that are favorites of mine right now.

First is Lions Gate Entertainment (LGF). I did something here which is normally not advisable - shorting the stock in anticipation of a pattern. In other words, I saw a head & shoulders pattern forming, and I shorted the stock before the pattern was complete. Sometimes this can work against you, as the stock moves away from the pattern and negates it. In this case, I got lucky, and today's drop in the stock pierces the neckline, thus completing the pattern. Based on this, it still has plenty of downside potential (and thus upside for a short).



Next is Apple Computer (AAPL). This has been a huge winner over the past several years, but I think it's run out of gas. I've got a nice clean stop-loss point marked on this chart in case it violates that descending trendline, thus negating the recommendation.



And lastly, Helmerich & Payne (HP). The vertical ascent of this stock seems to have also run out of steam, and here again we've got a clean, tight stop to minimize risk:

Family Dollar Cracks & Russell 2000 Softens

I mentioned Family Stores as a short candidate a couple of weeks ago since it's in a really huge head & shoulders pattern (which is obviously one of my favorites) and - sure enough - it's starting to break down. It was down nearly 10% today alone.

By traditional technical analysis measurements, the target price for this stock is so low I don't even want to utter it. If you look at the entire history of this stock, the pattern is gigantic. So the neckline has, in classic style, changed from support to resistance. If the pattern sticks, the price shouldn't penetrate above this neckline again for a very long time. (I'll mention once again that clicking on any of these pictures will make a much larger graphic appear).



As for the market in general, today there was tremendous weakness in retail (which has, for a couple of years, been absurdly strong - check out Nordstrom, Abercrombie & Fitch, American Eagle, Coach, etc.), and all the broad indices sank. The Russell 2000 (IWM), a favorite of mine recently, has been "kissing the underbelly" of the trendline it broke many months ago. But, as an ascending trendline, one can be short this market, remain safely beneath and trendline, and still lose money every day - - because it's still going up!

In any case, after a long time clinging to the underside of this line, it finally fell away today. Tomorrow's unemployment report will probably drive the market to either trim these recent losses or more firmly push it downward. Long term, I remain confident of a major downward move, no matter what happens in the short term.

Update on Corning (GLW)

When I first made the recommendation to buy Corning (symbol GLW - see original post), it was at about $15. Take a look at what a good breakout can do! Up 35% in the 10 weeks since then.....