Short-Sale Set Up - Potential shorts list 5-18-16

Published : May 18 2016 at 8:26 ET

The following names have either a) serious defects within their patterns even as they try to claw their way back to old highs, or b) ones that have been knocked down a bit, thus falling faster than the general market. Some of these names we have discussed in detail in separate SSS reports. 

It is best, as discussed at length in the webinars, to short individual names on weak rallies up to areas of resistance. Market context is important in terms of watching for those stocks that cannot keep up with market rallies, or those stocks that get hit harder than the major averages then rally weakly up to logical areas of resistance. 

GOOGL - has breached its 200-day moving average, bringing it into play once again as a short, but this time using the 200-day line as a guide for an upside stop. The stock was previously shortable on the post-earnings gap-down last month per our SSS report at that time. 
AMZN - has breached the $700 "Century Mark," which puts it into play as a short-sale per Jesse Livermore's Century Mark Rule in Reverse using the $700 level as a guide for an upside stop.
HD - has breached the 50-day moving average, bringing it into play as a short using the 50-day line as a guide for an upside stop.
MCD - has breached its 20-day moving average and a recent breakout point, bringing it into play as a short using the 20-day line as a guide for an upside stop.
MSFT - has been previously reported on and was shortable on this most recent rally up to its 20-day moving average. The stock is now back below its 200-day moving average by a small margin, putting into play as a short right here while using the 200-day line at 50.89 as a guide for a tight stop.
NFLX - was shortable back in April when we first reported on the stock following its post-earnings shortable gap-down move. It is now in a bear flag and is potentially shortable here using yesterday's intraday high at 90.87 as a guide for a very tight stop. Otherwise, the 20-day moving aveage at 92.16 can be used as a wider stop.
TSLA - is rallying this morning after Goldman Sachs pumped the stock with a buy recommendation, but we would look to use such rallies as short-sale opportunities. 
DIS - gapped down last week after announcing earnings and has remained in a short bear flag since then. is now pushing below its 200-day moving average which would bring it into play as a short using either the 200-day line as a tight upside stop or the 20-day moving average at 102.36 as a wider stop.
MBLY - shortable here using the 50-day moving average at 37.05 as a guide for a tight upside stop.

Note that when we refer to the 20-day moving average we are using the 20-day exponential moving average as discussed in our latest book, Short-Selling with the O'Neil Disciples. Also, keep in mind that shorts will work best in the event of a continued market downtrend. As long as the Market Direction Model remains on a sell signal, the short side can be entertained.

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