After enjoying a massive 2019, bulls are starting to sell. Stocks dropped today as investors exited the market in droves. And they’re not doing it because there’s anything to be afraid of in particular – everything’s roughly the same as it was yesterday.
Outside of the fact that China confirmed it was signing the “phase one” trade deal this week.
Instead, investors are dropping out for other reasons, most of which being clerical in nature thanks to an approaching tax season. But that doesn’t mean some folks aren’t legitimately worried about a 2020 correction.
Especially after the December we’ve had. The market’s done little but go up since late November, wouldn’t it make sense to “cut and run” when the going is good?
Certainly, but that doesn’t mean a protracted sell-off is on the horizon. It also means that if you’re thinking about adding short positions to your portfolio, it might make more sense to target stocks that are less correlated with the general market.
Take, for example, Antero Midstream Partners (NYSE: AM), a natural gas servicing company that’s poised to drop.
In the daily candlestick chart above, you can see that AM – much like the general market – had a great December. However, that’s where the similarities end. The rest of 2019 has been a cascading waterfall of disappointment for AM, marked by a 34% yearly loss. In fact, this is the stock’s third “down year” in a row.
And, as luck would have it (for bears), things could potentially get a whole lot worse. After scraping the upper Bollinger Band (BB), AM’s slowing down. Today, the stock broke out below its minor bullish trend (the yellow line), forming a “double top” – a universal indicator of a trend reversal – in the process. Support at around $8.00 was too steep a hill for AM to climb, and over the next week or two, the stock could plunge.
In this case, the double top is signaling a reversal of the short-term bullish trend, and a trend continuation of the long-term bearish one. The stock has been sold-off into the dirt for years now.
It looks like it’s ready to continue that tradition.
So, over the next day or two, if AM drops below the most recent day’s low, it might be a good idea to go short with a trade trigger of $6.95. The general market could absolutely rise further in January.
Why take a chance on shorting a blue-chip that would likely rise with it? With AM, you’ve got an uncorrelated stock teetering on the edge of another collapse.
That’s low-hanging, bearish fruit if I’ve ever seen any – particularly for short-term traders.
