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.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important 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
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.