Market Timing A Stock Short List

In the midst of a bull market there’s always a bear growling somewhere.

Right now, it’s more like the bull that’s running on fumes while the bear is loading up for a long severe winter.

But even if the rising indexes in the stock market can continue to defy a declining economy for a while there are obvious stock sectors that are no-brainers for shorting largely because Covid-19 has put them either out of business for the immediate future or has severely hampered profit prospects for this year.

The most obvious are the cruise companies — NCLH, CCL, RCL — since it’s going to be a long time before they can pack a liner with either customers and crews. And now several of the key destinations have so enjoyed being tourist free there is talk they are not even going to allow the ships to dock and disgorge passengers like they were doing before the pandemic.

Next on the list movie theaters — AMC, CNK — since even if they open with social distancing they will at reduced audience capacity. Can they make profits on half a house or less?

It’s the same in the airline sector — AAL, UAL, DAL, LUV — less flights, less passengers, more trouble with the virus every hour of the day. Throw with BA too. No need to buy passenger planes when there are so few passengers and you have a fleet of excess airliners in storage.

YELP and TRIP are on the list. Without as much to review as they had before the pandemic, they have diminished prospects for the near term and maybe longer.

Yelp gave a sell signal on its own today, dropping out of being overbought (see the chart below).

Coal stocks — BTU, ARCH, SXC, CNX — on the short list because the coal sector is always a short. It is not the fuel of the future and is becoming more and more not the fuel of the present. If ever there is a sector for swing traders to short every bounce this is it.

BTU particularly.

In the past year, its stock has traded north of ten dollars and closed today at ninety-nine cents — 99 cents! The company in the not too distant past, has gone bankrupt, wiping out shareholder equity, and judging by the cascade of its stock price it looks as it wants to go there again.

While it’s too to late to do much of anything with BTU except wave goodbye its brother ARCH, at $28, appears to be stumbling down the Darvos-Box stairway and still has plenty of room to fall (see the chart below).

In short these are stocks to short.