Each week we identify names that look bearish and may present interesting investing opportunities on the short side.
Using technical analysis of the charts of those stocks, and, when appropriate, recent actions and grades from TheStreet’s Quant Ratings, we zero in on three names.
While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names.
Cracker Barrel Cracks
Cracker Barrel Old Country Store Inc. (CBRL) recently was downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings.
The restaurant chain is a repeat offender on the Bearish Bets list. It has a miserable chart, with the stock recently breaking hard to the downside on very high turnover. That means big institutions are selling the name. It has been unrelenting, and while the market is going up Cracker Barrel’s relative strength is uber poor.
Money flow just went bearish and moving average convergence divergence (MACD) has crossed over for a bear signal. What else do you need? Oh yes, the cloud is red! Bearish, so it’s time for a short play. Let’s target the mid $70s here, but put in a stop at $100 just in case the short covering gets started early.
Catalent Struggles
Catalent Inc. (CTLT) recently was downgraded to Sell with a D+ rating by TheStreet’s Quant Ratings.
The maker of solutions for drugs and biologics is another repeat offender in this feature. It’s no wonder why, as the chart is horrendous after those two huge gaps lower. Volume was very heavy on those drop days, and on the first gap lower Catalent really tried to but failed to rise even past the 20-day moving average. Then another gap lower just stunned the bulls.
No doubt some short covering is happening here, but the trend line drawn in yellow is telling us resistance is going to be tough to penetrate. The Relative Strength Index (RSI) is starting to roll over. Let’s attack this one with a short here; target the May lows at $32, put in a stop at $48 just in case.
Vital Farms Yields a Short Play
Vital Farms Inc. (VITL) recently was downgraded to Sell with a D+ rating by TheStreet’s Quant Ratings.
The pasture-raised food producer is a new name, but Vital Farms presents the same ol’ bearish chart pattern. With a defined downtrend pattern of lower highs and lower lows this stock is under pressure.
Money flow is bearish and the MACD is rolling over. RSI is bending down steep, which tells us more downside can be expected. A sharp move down below the 50-day moving average this week was quite telling, indicating this stock has room to go lower. There is also a gap to fill down at $13, but we don’t think the stock stops there. Put in an aggressive target of $10.75, but also set a stop at $15 just in case.