I picked seven S&P 500 US stocks to short sell yesterday, hoping to show a profit overall. ORCL, MO and AMAT stocks could be my big winners, while QCOM, XRX, DOW and LLY stocks might turn out quite profitable. Following a strict money management strategy I risk no more than 2% of my trading capital in each trade, but setting stop losses of various tick size means different number of shares for each stock. Therefore a stock price movement of the same percentage equals to different performance depending on the stock in question. Why did I opt to short sell these specific SP500 stocks? Mainly because chart patterns and technical analysis imply the stock prices are more likely to fall than move upwards.
ORCL stock pick: The Oracle’s stock price is clearly trading in an uptrend according to the weekly graph, but there is evidence in the daily and 60 minutes’ graph that we might see a possible retracement in the following weeks. I’m betting on that retracement and have set a stop loss at 29.30 in case I’m wrong. The ORCL stock is the stock that I am trading the most shares of right now. The stock daily chart formed a hammer yesterday and failed to overcome Friday’s high, while in the 60-min chart there is MACD divergence. While I’m risking 20 ticks as I sold at 29.10, I stand to win 100 or more ticks if the ORCL stock price drops to the 20-days moving average. If the price retraces to the 20-weeks moving average, the profit could exceed 300 ticks, although I have to hold my position for a couple of months in that case. I like the risk/reward ratio of this trade.
AMAT stock pick: Applied Materials’ stock is trending downwards the last months, and the weekly graph proves that. However, the last 6 weeks the stock has retraced to $12 but has failed to go beyond that price. $12 has been a major support level in the past that has now verified as a major resistance level. Additionally the stock price is currently trading right at the 20-weeks moving average, providing plenty of space up to the lower weekly Bollinger Band given the AMAT stock resumes the downtrend. Furthermore, the Bandwidth at the daily stock graph is narrowing, indicating the recent uptrend is ending, while the 60-min graph shows Fail Tops.
MO stock pick: Altria Group’s stock has certainly reached a turning point. The resistance level found at $25.00 mark is definitely an important obstacle to the huge uptrend. The all-time high won’t give up so easily and it offers a great opportunity to short sell the MO stock. The stop loss is set right above it and the risk/reward does seem promising, just like ORCL stock. Do we verify this signal with other chart patterns in the daily graph? Well, there is slight MACD divergence, as the price continued to go for new highs and the MACD has maximized, but personally the resistance level alone makes it a great spot to enter a trade. A retracement to the previous resistance level at $22.00 is likely, but I’d be happy to take my profit at $23.00.
The other four stock picks, QCOM, XRX, DOW and LLY have all reached turning points according to their weekly or daily graphs. LLY stock has been trending sideways and upon looking at the weekly graph, the support and resistance levels of the trending channel are pretty much apparent. I’m willing to risk some money in that tunnel, hoping the resistance level holds once more. The XRX stock chart indicated the strong resistance level found at 11.50, verified by the candlestick of 23th of April and the weekly candlesticks of April, accompanied with the similar hourly candlestick of Friday’s close. The XRX stock price clearly has trouble piercing the 11.50 resistance level and staying there. Entering long at this moment surely can’t be justified. DOW stock on the hand may seem riskier but if the stock price fails to go beyond $30.00 this week, the Fail Top at the weekly graph would add confidence in the short position I have entered. Finally, QCOM stock is unable to break above $46 and given the fact that the Bandwidth has extremely narrowed, we will probably witness the beginning of a short term at least downtrend the following weeks.