DFS (Short)...

Making a pick today is kind of tricky in that I see a lot of stocks that are ripe for oversold bounces. Such stocks would make for good short-term long trades, but would represent good intermediate-term short trades. Today's pick is another short, this time it's DFS. Yesterday, DFS sold off very hard, over 10% on 2.5x the average daily volume. Today, DFS shed another 2.5%, but on ~7x the average daily volume. DFS priced a 54M share offering at $9.25. I view DFS as a low-risk, high-reward short. I would not give it much room above today's highs around $9.69 because if it can get that high, it's got a shot at filling the gap-down created yesterday, which would take it up into the $10 range. I hope to establish a partial short on this stock somewhere within today's trading range between $9 and $9.70 and I would look to add to that short on a break below $9. If the bears can get a hold of this stock, I could see it dropping to fill the gap-up from April just under $7. Prior to this week's action, I had DFS on my long watchlist on a pullback to the 50-day EMA, but this week's stock offering has made me flip camps to the bearish side. DFS doesn't report earnings again until late August or early September.



Position: none