Sunday, May 19, 2024

Bearish Bets: 3 Downgraded Stocks You Should Consider Shorting This Week

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These names are displaying both quantitative and technical deterioration.

Stocks quotes in this article: INCY, YUMC, CNC

Each week we identify names that look bearish and may present interesting investing opportunities on the short side.

Using technical analysis of the charts of those stocks, and, when appropriate, recent actions and grades from TheStreet’s Quant Ratings, we zero in on three names.

While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names.

Incyte Incites Thoughts of Shorting

Incyte Corp.  (INCY) recently was downgraded to Hold with a C rating by TheStreet’s Quant Ratings.

The biopharmaceutical company is a repeat offender on the Bearish Bets list, and little doubt the recent fall indicates there is more downside to come. Moving average convergence divergence (MACD) has rolled over now — that indicator is on a sell signal. The price action has been horrendous, with lower highs and lower lows. And take a look at the volume bars — heavy turnover on the down sessions.

There is good support at the 100-day moving average; call it $75.50 or so. If short, target that area and perhaps a bit lower at $70 bucks, but put in a stop at $84 just in case.

Yum China Isn’t Yummy

Yum China Holdings Inc.  (YUMC) recently was downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings.

The operator of KFC and Pizza Hut restaurants in China bounced nicely the other day off the 50-day moving average, but turnover is not inspiring. The volume trends are rolling over to bearish, with lower highs on the chart. MACD is on a sell signal, confirmed from a month ago. Indeed, we see a bearish head-and-shoulders pattern forming, targeting the $46 level.

The cloud is green and clinging to that signal, but a few more down sessions and we’ll have a bearish signal as the cloud would turn red. But we’re getting ahead of ourselves here; we are targeting the 100-day moving average (gold line), around $54. Put in a stop at $65.

Centene Looks Sickly

Centene Corp.  (CNC) recently was downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings

The healthcare giant is in a miserable downtrend. The channel is well-defined here with lower highs and lower lows. Money flow is quite bearish, and any rally is sold with vigor. MACD is on a double sell signal, and the Relative Strength Index (RSI) is bending lower at a steep angle with lower high and lower lows.

Centene has performed poorly versus a strong market trend in 2023, and that spells trouble. Let’s target the $62 level, and perhaps a bit lower. Set a stop at $78; if it gets through there we know we are wrong.

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