If you want to know where the trading action is and can short a stock just as easily as you can go long, then take a look at Smith & Wesson Holding Corporation (NASDAQ:SWHC), Tronox Ltd (NYSE:TROX), and Colgate-Palmolive Company (NYSE:CL). Here's why.
With just a quick glance, Colgate-Palmolive Company doesn't appear to be in all that much trouble. The broad trend still appears basically bullish despite last week's stumble, and it's not like CL has pulled under any key support lines or moving averages. It's nothing big that's waving a red flag for this stock though.... it's a million little things on the chart that say the stock's already rolling over.
For starters, though the bigger trend may still technically look bullish, the MACD lines say the tide has already turned for CL. The on-balance volume line is also sloped slightly downward now, telling us there are more sellers than buyers [though that clue was becoming modestly evident with the volume bars alone]. No, none of it is all that dramatic, but all big trends start out as small ones. And, given how strong the rally from Colgate-Palmolive Company was earlier in the year, there's a lot of profit-taking potential packed into the chart..
There's no doubt as to why Smith & Wesson Holding Corporation shares are under bearish pressure today (and were on Friday as well).... the tragic events that unfolded in Newtown, Connecticut on Friday will almost certainly lead to tighter gun control laws, crimping sales for SWHC. Yet, there's more to the story than just that.
First and foremost, SWHC was already slumping before Friday's shootings. In fact, the stock was in some serious technical trouble, moving under the 100-day moving average line several times in October and November, and as of Thursday, making another - perhaps the last - decisive move under that key moving average. And, you can also see that the 20-day and 50-day moving averages are on the verge of crossing under the 100-day line. Point being, though some traders may argue that impending gun control laws will actually boost sales before new restrictions are put into place (which is what boosted Smith & Wesson Holding Corporation shares before the election), the chart says the market was already poised to sell SWHC anyway. Now there's just a clear reason for that effort. If the 200-day moving average line at $8.59 breaks, the selloff should accelerate.
Last but not least, Tronox Ltd is poised to open 6% higher today, at least according to the pre-market action. If it does indeed do that, the move should snap TROX out of a sideways funk that's been plaguing it since mid-November (following a big bearish gap and plunge). The bullish thrust should also convincingly send a message that the stock's downtrend from late September is most definitely a thing of the past.
TROX is, in simplest terms, a vertically integrated titanium oxide (used in paint) producer, that came into existence - back into existence - via the acquisition of Exxaro after Tronox Ltd emerged from bankruptcy earlier this year. The company is also waiting on a verdict in a key case that alleges Andarko owes it several billion dollars; arguments ended in the middle of last week. The surge this morning may well be speculation about the outcome of the case. Either way, it's looking like one of today's best bets, and also looking like it's got some shelf life following the prolonged pullback this fall.