Again I remind you that risk management in a bearish market means cash, income from cash and in the case of the current macro, Treasury bonds. It goes without saying that gold is always (in my opinion) long-term risk management as well.
That said, it’s a bearish market and while I don’t want to short the indexes at this time, I do want to look around for potential shorts on individual stocks. Two of them just popped up in the network security area.
PANW ticked a lower low to January and if it loses 164 it could have a decent decline. Thinking the August 5th low (recall that date is one we have referenced often as a potential downside target for the indexes). A higher low to that low of 142 could be reasonable, if PANW loses 164. This is conservative downside targeting. If support is lost and a bear market is actually beginning, well, it could go much lower.
A tight stop loss on a theoretical trade could be a pop back above 168. A more lenient stop could be if it makes a higher high to yesterday’s high of 174.74.
FTNT is a direct competitor of the above. If the markets continue bearish in the near-term, FTNT would be likely to lose the last ditch of weak support it sits on today. A breakdown would measure FTNT to the 71 area. A stop loss on the trade could be a pop back above 93.30, although 96 and a gap fill could give it more room to breathe. As with PANW, this is conservative “bull market” targeting. A real bear market would bring real destruction to many former richly valued darlings.
These are solid companies with valuations that are high compared to their growth. So if they break bearish it would be part of a valuation compression play in the markets. PEs in the 40s and 90s and PS in 11-12 range are high for growth of 12% to 14% (TTM).
With spanners, monkey wrenches and a whole lot of noise in the macro, anything can happen, including a bull snap back on overdone bear sentiment. But while managing risk the way I usually do, with cash and in this case T-bonds, I also want to illustrate some bearish potentials for you to consider or ignore as we go forward.
NFTRH+ trade setup ideas are presented for consideration and further research only, not as recommendations. I may or may not personally take positions in all or even most NFTRH+ ideas, as it would depend on my portfolio composition at any given time. “Stop loss” and target levels are usually noted and should be respected.
