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Watchlist Update: No Big Surprises for Stocks

Surprise, surprise… Another down week for stocks.

As I pointed out last week, the trend is unquestionably bearish. 

The markets continue to see sellers in control with high volume on the downside.

As I write this update, the S&P 500 is trading within 2% of its 52-week low… 

Not a good sign for bulls.

Inflation Takes a Toll

Retail was hit hardest last week, which was certainly a contributing factor to the overall selloff.

Disappointing numbers from Walmart (WMT) and Target (TGT) triggered a selloff in consumer staple stocks, which is typically a sector that investors look to for safety.

In just three days, Target stock fell 30%, and Walmart was down almost 20%. Even Procter & Gamble (PG) was down double digits. 

Higher prices at the grocery store are translating to lower sales and profits.

And what’s happening is that Wall Street is learning that the retail consumer, the biggest overall contributor to gross domestic product (GDP), is not as healthy as we thought. 

Sell the Snap-Back

I remain bearish on the overall market and will again focus on short trades this week. 

But it is important to remember that we could see a “snap-back rally” at any time. 

If that happens, I will use it as a chance to sell the bounce and get short the worst-performing stocks as they approach their 50-day moving averages. 

Historically, some of the biggest rallies occur during bear markets. 

Daily Chart of Nasdaq 100 Index — Source: TradingView

Back in March, for example, the Nasdaq 100 jumped 17% in just two weeks. 

But the selling soon resumed. 

So, be cautious and don’t get sucked into buying until we have real confirmation that the bear has been killed. 

I’ll let you know when the time comes. For now, here’s this week’s list of short candidates…

SPX Corporation (Short Idea)

SPX Corporation (SPXC) is a $2.2 billion infrastructure equipment company for the heating and air industry.

Here’s how the chart is setting up…

TradingView Chart
Daily Chart of SPX Corporation (SPXC) — Source: TradingView

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

  • Surge score: 38/100
  • % Above 52-wk low: 13%
  • Sales growth: +7%
  • Return on Equity: 12%
  • Triple momentum: yes (short)

SPXC has been falling all year. The stock has stair-stepped its way down in a series of lower lows and lower highs.

Resistance can be found at the red 50-day moving average where I have highlighted sell zones on the chart above. 

Consider shorting SPXC here with a stop above the $50 level.

Alarm.com Holdings, Inc. (Short Idea)

Alarm.com Holdings, Inc. (ALRM) is a $3.1 billion technology company that makes smart devices and systems for residential and commercial properties.

Here’s how the chart is setting up…

TradingView Chart
Daily Chart of Alarm.com Holdings, Inc. (ALRM) — Source: TradingView

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

  • Surge score: 38/100
  • % Above 52-wk low: 12%
  • Sales growth: +19%
  • Return on Equity: 19%
  • Triple momentum: yes (short)

You’ll notice the chart for ALRM looks almost identical to SPXC…

Both are following the same pattern of lower lows and lower highs and finding resistance at the 50-day.

I suggest using last week’s rally as an opportunity to sell ALRM short with a buy stop around the $65 mark. 

If the trade works properly, the stock should make new lows in a week or two, which is where I would begin taking profits.

Advanced Micro Devices, Inc. (Short Idea)

Advanced Micro Devices, Inc. (AMD) is the $153 billion semiconductor company best known for its computing and graphics processors.

Here’s how the chart is setting up…

TradingView Chart
Daily Chart of Advanced Micro Devices, Inc. (AMD) — Source: TradingView

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

  • Surge score: 59/100
  • % Above 52-wk low: 16%
  • Sales growth: +71%
  • Return on Equity: 52%
  • Triple momentum: yes (short)

The fundamentals for AMD actually look good. But as always, the market knows best…

And the market has been selling AMD en masse for the last six months.

Last week, the stock tested its 50-day moving average (red line) without success. 

The stock appears to be rolling over, giving investors a low-risk opportunity to play the short side.

Consider selling AMD short here with a stop above last week’s high at $104.25. 

Waiting for the Bottom

Once again this week, I’m still largely interested in short trades. Until we find a real bottom, I feel this is the appropriate strategy.

And we won’t know for sure that the bottom is in until we start to see massive buying by institutions.

These are hedge funds, pension funds, endowments and other trillion-dollar organizations that are eventually going to start scooping up stocks at value levels.

And when they put their money to work, following their lead can pay off big time.

This is exactly what I focus on in my premium Stealth Trades research service.

So, if you’re interested in giving it a try, click here now to view my latest presentation.

Embrace the surge,

Ross Givens
Editor, Stock Surge Daily

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