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Jeremy Frommer, CEO of Hedge Fund LIVE Jeremy Frommer has 20 years of industry experience and is currently responsible for general management and leadership of the General Partner. Previously, Mr. Frommer was a Managing Director and Head of the Global Prime Services Group (“GPS”) at RBC... More
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  • Short This Market, I’ll Say It Again: Which Names to Short 0 comments
    Mar 10, 2011 3:30 PM | about stocks: ANN, EMC, WHR

    HedgeFundLIVE.com — On March 7, I wrote a blog titled “Short This Market- Now’s the Time.”  Didn’t get the greatest feedback on a couple sites on this blog.  Today we broke the Feb.24 low of 1292.50 on ES.  I feel comfortable with the short thesis.  As I mentioned numerous times in my blogs, trading is all about timing.  Everyone knew a pullback was coming, but when do you start piling into your shorts?  For me, March 7 was right about that day.  I don’t think this is a missed opportunity; it is not too late to short.  Names that I have been looking to short are stocks in the growth sectors (for a background on growth vs. defensive sectors and how they perform in up vs. down markets click here), namely Tech names.  I am staying away from the Financial and Energy sectors, although they are growth sectors as well: Financials because of upcoming release of stress test results, Energy because they will benefit from the oil rally, which I believe has room to run and will take crude up to 120ish level. I could also look to Industrials, another growth sector, but I personally don’t know enough about that sector and so don’t feel comfortable in it.

    Within growth sectors, I would like to short names that have run up and are near their recent highs.  I am being very careful not to choose the very strong stocks, however, as that is too much of a tape fight for me to handle (for example, EMC, which looks like a great short from many technical standpoints, but too strong for my liking).  Instead, I am looking for names that are near short term highs, but have shown signs of clear weakness in the past six months.

    Similarly, I am looking at how names performed in the May-July sell off that occurred last year.  Names that got crushed the most during that time are the ones that I am looking to short.  I am also looking for names with strong support levels below–strong meaning they have been tested frequently in the past 12+ months–as they will likely be tested again now.  Names like EQIX are what I’d like to short and I can see that stock trading back down at 75 again soon.

    I also don’t mind shorting names that have been range bound for the past several weeks as I believe the action will resolve itself to the downside in this market, especially if the stock has not been in the middle of a strong run up: names like ANN.  WHR is also a potential short candidate for me as the stochastic has just entered into overbought territory and has been in an overall downtrend; WHR is way off its 52 week high from the run up in April last year.

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    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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