By Christopher Diodato – TradersBase.com
When looking for stocks to short, it always refreshing to find a stock that declines in both bull and bear markets. OSG exhibits this behavior! Here’s a chart of OSG vs. its sector, the transports.
Two things to notice.
- OSG has been seriously underperforming the transports, and the overall market since the 2010 “flash crash.”
- The transports are now declining again!
So, if the transports are rising, and OSG is falling, then that likely means that if the transports are falling, OSG is falling more! It’s a concept called relative strength, and the premise that weak stocks often become weaker when markets weaken is generally true.
So what’s the trade? Below is a picture of the chart, the triangle formation, and our targets and stops. Below that, is the video analysis. Note: This stock is showing up as “hard to borrow” on my software, so you might be stuck with using options. I would recommend option selling strategies at this point, since implied volatility is near two year highs for OSG (That means buyers are getting ripped off!)
Happy trading!
~Chris Diodato
What good are technicals without fundamentals. Oil prices are going up again, which is good for OSG, but it will take down many companies in the transportation index, like airlines.