Saturday, January 26, 2008

Possible Shorts for Next Week

As I looked through my scans for the weekend, I still found quite a bit of charts that look shortable. When you have a bunch of charts to choose from, it is sometimes hard to narrow those charts down to a select few that will likely perform the best. I like to use a few of Telechart's proprietary indicators to help me do this. The Balance of Power (BOP) works well but I find it is more useful when looking for longs, so that doesn't come into play as much right now. I do like using the Moneystream indicator to spot possible divergences in stocks, and I have included this indicator on the charts below (the gray dotted line) to give you an idea of how I use it for shorts. I found many charts that had nice shorting patterns, but not all show the weakness in moneystream that these did, so I am going to focus on these stocks.

You will probably quickly notice that almost all of these stocks are in the fertilizer sector, a sector that has been very hot up until recently. As I said in my last post, it is virtually impossible to predict what this market will do from day to day because of all of the items being thrown at it next week, but I do believe that unless the market puts in a quick stand and continues to bounce, these former leaders are done for, based on their chart patterns, and could all make excellent shorts that have a lot of potential reward. Timing them is a bit hard because some are still above their 50 day moving averages, but the fact that all of them are showing the same type of pattern tells me that if the market does indeed continue lower next week, then these stocks will be moving lower as well, and likely in a hasty manner. I will have them on my watchlist because I have no short positions in any of the fertilizer stocks right now. If you do take positions, please remember to set stops because it is still possible for these to run higher. Good luck next week!
JASO
AGU
CF
MON
MOS
POT
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

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