Each week we identify names that look bearish and may present attractive investment opportunities on the short side.
Using technical analysis of these stocks’ charts and, where available, recent stocks and ratings from TheStreet’s Quant Ratings, we focus on three names.
While we won’t dive into fundamental analysis, we hope this article gives investors interested in falling stocks a good starting point to do some additional research on the names.
DR Horton hurts
DR Horton Inc. (DHI) was recently downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings.
Housing inventories have been a disaster since the start of 2022. No surprise though, as rising interest rates have kept borrowers on the sidelines, waiting for when interest rates stabilize. It could be a while. In the meantime, homebuilders like DR Horton are stuck trying to build up the right amount of inventory.
Earnings are solid, but frankly the charts tell a story that is bearish down the road. This stock is showing a steep downtrend channel of lower highs and lower lows. The cloud is red and the money flow is strongly bearish. No relief here.
Grab some shorts and aim for the mid $50, stop at $77.
Starbucks has stage fright
Starbucks Corp. (SBUX) was recently downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings.
Even the return of the former CEO can’t help Starbucks pull itself together. The stock has been swirling in a downtrend for months, with lower highs and lower lows. Money flow is weak and the Moving Average Convergence Divergence (MACD) has just crossed a bearish signal.
The Relative Strength Index (RSI) is negative and shows a steep downward slope. This tells us that other downsides are likely.
Target the mid-$60s, but stop at $86, which is quite aggressive. This stock should eventually move towards the target.
Boston beer goes flat
Boston Beer Co. (SAM) was recently downgraded to Sell with a D+ rating by TheStreet’s Quant Ratings.
The brewer behind the Samuel Adams brand is showing a miserable downtrend with high volume, poor price action and a bearish MACD. The RSI is in a strong downtrend and the recent contact of the 20-day moving average and the downtrend line has reversed sharply. This tells us that the price is being rejected at every dip, with lower highs and lower lows.
It’s hard to believe this stock was at $550 just five months ago, but it looks like there’s more downside to be had. Target the $300 area, put a stock at $395.
(Real-money contributor Bob Lang is co-portfolio manager of TheStreet’s Action Alerts PLUS. Want to be alerted before AAP buys or sells stocks? Learn more now.)
Receive an email alert each time I write an article for Real Money. Click “+Follow” next to my signature for this article.