Too many folks in the financial advisory market are just in the business of pitching stocks to buy.
On any given day, all of the major firms have thousands of “analysts” with their buy recommendations complete with armies of marketing folks pitching their credentials to get folks to subscribe and follow.
But there are also many, many stocks that are cratering on any given day. That means that not every analyst or guru can or will be right all the time.
Take, for example, yesterday’s opening hours for stocks in the Russell 2000 Index. I saw six stocks on my screen that were down by double-digit percentages, including one that was down by over 54%.
I checked up on that stock – and I saw seven buy recommendations and only one sell that really is just listed as “underweight.”
Unlike those analysts, I don’t just track stocks that are set to surge higher…
I also use my proprietary indicators to find stocks that are in dire straits and set to plunge!
And in today’s issue of Traders Daily Direction, I’ll go through one stock that has caught my attention that is doomed to surge – to the downside.
This week hasn’t been the best for US stocks so far, which is why bearish trades are just as important as bullish trades.
However, keep an eye on Dexcom (DXCM) from this week’s Watchlist, as it is already up so far this week by 1.50%
Now, here’s how I found a stock to short sell this week…
A Surging Short Trade
Stocks surge in both directions.
Of course, I like it when they surge higher.
But I’m happy to make money on the short side as well.
The markets have been choppy for several months.
And while the indexes are making new highs, this is misleading.
Stock participation is low. By that I mean that most stocks are not participating in the rally.
In fact, only half of Nasdaq stocks are above their 50-day moving average, a common measure of short-term momentum.
Nasdaq Composite Index Stocks Above 50-Day Moving Average & Nasdaq Composite Index Price — Source: TradingView
I’ve discussed this concept in past issues and why the Dow and S&P are driven by a small handful of names.
Needless to say, the market is not as strong as many would have you believe.
So, it only makes sense to watch for short opportunities as well.
There’s a saying among traders that stocks take the stairs up and the elevator down. In other words, they fall faster than they rise.
So, if you get a good entry, you can make big profits very quickly.
Here is a stock setting up for a great short entry…
The company is Annovis Bio (ANVS).
After a 3,000% explosion higher, the party appears to be over.
Longer-Term Daily Chart of Annovis Bio (ANVS) — Source: TradingView
Shares fell 74% after reporting a flat second-quarter loss and have failed to recover.
Now, the formula for finding good shorts is the same for finding stocks about to surge higher – but in reverse.
Instead of a resistance level, we have clear support at the $33 mark.
Shorter-Term Daily Chart of Annovis Bio (ANVS) — Source: TradingView
Volume is also drying up – a sign that fewer buyers are stepping in to support the share price.
Finally, recovery bounces are getting weaker… from 30% to 12%. And now it is approaching the dead low.
All signs point to a second wave lower.
If ANVS can take out the $33 level, I’ll be looking for a spike in volume to confirm that bears are abandoning ship and dumping their positions.
This is a great reminder that stocks surge both ways…
And that money can be made both on the upside and downside of the market.
Embrace the Surge,
Editor, Traders Daily Direction