Looking to short the Tesla share price? Here are some other candidates
As investor interest in shorting Tesla rises, we look at some other stocks with long-running downtrends, which may provide shorting potential.
Given the hype surrounding Tesla, and the huge rally in the stock, it is hardly surprising that Google searches for ‘how to short Tesla’ have spiked.
But while the price looks to have reached an unsustainable level, there is no telling how long any pullback will last. Indeed, in a bull market, the downside for such a strongly-performing stock can be very limited. Traders looking for worthy short ideas, perhaps to hedge their longs or their pension, might be better off going elsewhere, looking for serial underperformers to keep on a watchlist in order to ‘sell the rally’ when it appears.
The IG stock screener is a good place to start in this search. By selecting companies which have are negative over the past 52 weeks, and filtering for those with a market cap above $100 million in order to remove small firms, a trader can narrow down the universe of stocks to find possible candidates for short positions. Even in the strongest bull market, there will be companies that have underperformed their indices, and could continue to fall even as the headline index rises. Below are some examples.
Metro Bank has the kind of chart a short seller loves. The three moving averages were declining, and the price was barely able to muster even a passing rally. It is, after Intu Properties, the worst performing FTSE 350 company. For now the downtrend is in place, but it is important to note that the downside seems to have been stemmed around 170p. But a break below this would seem to suggest more losses are on the way.
The UK retail environment is tough, and Ted Baker is a prime example. From around £30.00 in March 2018, the shares have continued to lose ground, and a recent rally may now provide another possible selling moment, if another lower high is created.
Once upon a time Chesapeake was worth $70.00 per share. But the brief recovery after the financial crisis slowly fizzled out, and from 2014 onwards the stock has been a terrible investment. Brief rebounds along the way have given way to further losses, and the latest bounce in September and October 2019 merely provided excellent entry points for short positions. Similar retracements in the future may be similar opportunities. Peabody Energy is another stock where the rebounds provide the chance for new shorts to enter the fray.
A 90% decline for the stock since 2014 still leaves plenty of room for more downside, if the prospects for this firm do not improve. The smooth losses of 2017 have given way to much more volatility, and the rebound from August into December shows that, even in poor performers like this, it can be hard to implement a shorting strategy, and thus risk management and use of indicators to identify peaks will help to cut back on heavy losses.
President Trump’s desire to revive US steel manufacturing has not down much for the eponymous company, which has been on a losing wicket (or whatever the baseball equivalent is) since topping out around $45 in early 2018. While the stock market overall recovered from December 2018 onwards, US Steel has continued to fall. While it rebounded in Q4 2019, the stock price ran into the wall of the 200-day SMA (currently $1251), and began to fall again. Elevated readings in daily stochastics and/or MACD have been useful, though not infallible, guides for potential short positions.
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.