Another hard day to make a stock pick, but only because there are so many I'd like to put up as potential shorts. Today, I am going to put MDR out there as a short pick. MDR has had a pretty good rally over the past several months, having more than doubled since March. However, not only has MDR's upside waned, but I believe it's due for a further drop. Note the breakdown below both the 50-day and 200-day EMAs. Also, note the lower high that was created as a result of that first breakdown. You can see that lower high failed to clear the 200-day EMA and the middle BB line. The stock proceeded to roll over and broke down again earlier this week. Over the past two days, it has had an oversold bounce. The big red volume bar for Wednesday and the close well off the lows of the day indicate a short-term selling climax. Today's rally on lower volume was a continuation of that oversold bounce. This bounce may continue a little longer, but in the mean time, I am looking to begin building a short position in MDR as it rallies up towards the broken support levels. I expect the moving averages to now act as resistance rather than support as they have in recent months.
One potential snag with this position is that it is an infrastructure stock, and we do have rumours of a second stimulus bill floating around. Be mindful of that, as it may ignite a further short squeeze. MDR does not report earnings again until August.
Position: none
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