3 Stocks On Shaky Ground

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These stocks are one well-placed banana peel away from breakdowns

With equities flirting with all-time highs you might be wondering why today’s gallery is focusing on stocks to sell. The reason is that it’s not just a stock market, but a market of stocks. And there are both winners and losers in every environment — even one where record highs are in reach.

Indeed, the rising tide is not lifting all boats. Some of these vessels have gaping holes in the hull and are sinking. The three stocks identified today carry similar characteristics. Their price trends are all pointing lower. They’re on the brink of breaking key support zones. And distribution days have cropped up to signal institutions are smashing the sell button.

Whether you’re looking for short trades to diversify your portfolio, or simply want to feel the thrill of profiting from pain, these stocks deserve your consideration.

Behold, three vulnerable stocks to sell.

Box

Click to Enlarge / Source: ThinkorSwim

Box (BOX)

Box (NYSE:BOX) shares were full participants in the 2019 comeback rally in the stock market. It set a blistering pace, gaining some 47% in the first two months alone. And then its earnings announcement killed the momentum. Since the late-February down-gap, BOX stock has been treading water.

But with this week’s slip, the company’s shares are now testing the lower end of the range. And that presents an exciting breakdown setup worth trading. The critical level to watch is $18.40. If BOX breaches it, watch out below. It could send the shares down to the next support zone at $16.

If support gives way then consider buying the June $19 puts.

Dropbox (DBX)

Short of one glorious bullish episode, the entire saga of Dropbox‘s (NASDAQ:DBX) public life has been disappointing.

Its 2019 flight path has mirrored BOX -full participation in the Jan-Feb boom and then upended by earnings. Since the quarterly report, DBX stock has been locked in a downtrend beneath falling moving averages. The 200-day, 50-day, and 20-day are all careening lower in a bearish fashion. With resistance heaped on top of it, DBX has struggled to score any kind of sustainable rally.

And yesterday’s high volume drop has me thinking more pain is in the offing. Support at $21 is being probed as I type and it’s a test that will likely fail. A successful support breach could send the stock back to its 52-week low at $18.50.

To profit, you could buy the July $22 puts.

Alcoa (AA)

Alcoa (NYSE:AA) has taken shareholders on quite the wild ride. Since 2016 the hellish coaster has risen 186% and then plunged 56%.

This year’s action can best be described as base building. It’s essentially traveled directly sideways with neither bulls nor bears willing to touch it. But if the premarket weakness in response to this morning’s earnings announcement is any indication, we could soon see a test of the lower end of its range.

$26.50 is the zone to watch. If buyers emerge to defend it, then hold off on bear trades. But if it fails, then it’s game on for shorts. Buying the July $28 puts or the July $28/$24 put spread are your go-to plays.

As of this writing on April 18, 2019, Tyler Craig didn’t hold a position in any of the aforementioned securities.

 

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