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Trifecta Stocks

Bearish Bets: Caterpillar's Technical Breakdown

By Bryan Ashenberg and Bob Lang | 07/31/15 - 07:36 AM EDT
Stocks in Focus: CAT, SOHU, WB, TK

Trifecta Stocks is a long-only model portfolio, but we are anxious to give our subscribers insight into stocks that may pose interesting investing opportunities on the short side. Using recent actions and grades from Quant Ratings and layering on technical analysis of the charts of those stocks, we will identify a few names each Friday that look bearish. While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names.

Caterpillar (CAT:NYSE)

CAT was recently downgraded to Hold with a C+ rating by The Street’s Quant Ratings.

Click here for a larger chart

The big industrial Caterpillar has been awful for months with high volume selling, technical breakdowns and awful relative strength. While the March low could be considered support, we would say any rally to fill the gap at $80 should be sold here or shorted. Indicators are solidly bearish.

Sohu.com (SOHU:Nasdaq)

This Chinese internet game service company was recently downgraded to Sell with a D+ rating by The Street’s Quant Ratings.

Click here for a larger chart

You would be hard pressed to find a strong Chinese stock out there. Most have come in hard as the Shanghai Index has tumbled into a bear market. China stocks have suffered mercilessly, and Sohu was stripped of big value. We see the decline is a waterfall type with big volume coming in throughout July. With a three-day rally, this is still not anything that can be bought.

Weibo Corp. (WB:Nasdaq)

The Chinese social media company was recently downgraded to Sell with a D+ rating by The Street’s Quant Ratings.

Click here for a larger chart

Weibo is another Chinese name [spinoff from Sina (SINA:Nasdaq)] that has also fallen hard but may have found some support. The recent rally off the lows suggests a turn could happen, but the indicators are still quite bearish. Until the 200-day Moving Average is recaptured at $15.70, any rally should be sold.

Teekay Corp. (TK:NYSE)

This big shipping company was recently downgraded to Hold with a C rating by The Street’s Quant Ratings.

Click here for a larger chart

TK has been in a downward spiral since late spring and has done a swan dive since mid July. There are just no buyers here and while a few days saw a bit of a rally, there is just too much resistance and sellers above. Resistance at $39, sell rallies.

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