The bulls have lost their grip over the past trading week as Fed tapering fears have stolen the headlines, opening the doors to volatile trading. The bulls’ sentiment has also changed; the market appears to be reacting bearishly to solid economic data and vice versa, likely because investors are assuming that stronger economic growth readings will perhaps prompt the Fed to more aggressively scale back on bond repurchases [for more commodity futures news and analysis subscribe to our free newsletter].
Given the hefty YTD gains still seen across Wall Street, many are hesitant to jump in long, especially ahead of the Fed meeting coming up in September. As such, below we highlight three commodity stocks that may offer an attractive short selling opportunity for those looking to bet against some of the stellar run-ups already seen across Wall Street.
The stocks included here are deemed to be great trading candidates for three reasons. First and foremost, each of these companies boasts a market cap upwards of $10 billion along with average daily trading volumes topping the $1 million mark, in an effort to weed out smaller, more volatile, trading prospects.
Second, these securities are trading below their 200-day moving averages, thereby implying that they are in longer-term downtrends. Lastly, these stocks are also trading above their five-day moving averages, which makes them attractive for swing traders looking to sell short before they resume their downtrend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques [see How To Lose Money Investing In Commodities]:
Consider STO’s one-year daily performance chart below. This stock has managed to hold above $21 a share for over two months now; however, the longer-term downtrend is concerning. Notice how STO has posted lower-highs and lower-lows since the start of the year. If STO fails to sustain bullish momentum past $22.50 a share, selling pressures will likely return here.
Consider VALE’s one-year daily performance chart below. The stock’s recent rally has managed to break above the longer-term downtrend channel; however, the fact that it remains below its 200-day moving average is still concerning. Similar to STO, VALE has posted consistently lower-highs and lower-lows since the start of the year; failure to summit $16 a share should present an attractive short opportunity for active traders.
Monsanto Company (MON)
Consider MON’s one-year daily performance chart below. Technically speaking, MON’s chart is the healthiest from this bunch, but it appears to be breaking down in recent weeks. MON looks to be entering into a potential downtrend; since hitting $109.33 a share, this stock has posted lower-highs and lower-lows, and even declined below its 200-day SMA (yellow line) for the first time in over a year.
Disclosure: No positions at time of writing