Two short candidates to take advantage of the new market downtrend

Having made an intermediate-term bottom in mid-November last year at 1,343.35, the S&P 500 index rose 25.6% to an all-time high of 1,687.18 on 22 May. Since then however, the market has begun a much needed correction, so far falling 4.7%. Although the bull market that began in March 2009 is still intact, as the chart below shows, the broad gauge of US equities has now established a downtrend.

A 2 month (60 min) chart of the S&P 500 (SPX) (Click on the chart for a larger version)

A 2 month (60 min) chart of the S&P 500 (SPX) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Given that the general market is now trending lower it makes sense to look around for opportunities to go short, and below are two such opportunities.

As the chart below shows, Visa is testing an important area of support and if it fails to hold the stock could quickly give back its recent gains. The next potential area of support for the stock is around $161.

A 2 month (60 min) chart of Visa Inc. (V) (Click on the chart for a larger version)

A 2 month (60 min) chart of Visa Inc. (V) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Those looking to make a quick profit from a fall in Visa should enter a short position as soon as the $176 support area is broken. An initial stop loss could be placed at the 50-day moving average at around $179.50.

Another company that shows the potential for a big fall is Expedia. As the chart below shows, the stock is testing the $54.50 area for a third time, and the 50-day and 200-day moving averages are also about to issue a sell signal to technical traders.

A 1 year (daily) chart of Expedia Inc. (EXPE) (Click on the chart for a larger version)

A 1 year (daily) chart of Expedia Inc. (EXPE) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

If Expedia breaks through the current area of support, traders could profit from a move that could take the stock all the way back to its July 2012 low of around $42.

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