Trade Alert: Betting Against Another Bounce

Bearish bets on three short candidates selected using AI.

A Brief Programming Note

Before we get to today’s trade alert, a brief programming note. This will be the first of three posts you’ll get from me today. Since the market is closed for Good Friday tomorrow, I’ll be publishing this week’s Exits post today, followed by our Top Names post later tonight.

Then you won’t hear anything from me until next week sometime. I just don’t want you to panic thinking your going to start getting three posts a day from me regularly.

Betting Against A Bounce Again

We’re taking advantage of a green day today to add a few more short positions. This time, I used ChatGPT 4.5 to help me construct a screen to find short names on Chartmill. Here’s the screen it came up with, after a discussion with me about avoiding some bear traps:

🔍 Unified Short Screen: Breakdown + Early Weakness

🧭 Technical Setup (Trend and Weakness)

• Price < 50-day SMA

• Price < 200-day SMA

• 50-day SMA < 200-day SMA → Bearish trend confirmation

• Relative Strength (6-month or 12-month) < 40

• RSI between 30 and 45 → Weak but not fully oversold

• Recent price action breaking support OR failing a breakout (manually reviewed in charts)

📉 Fundamental Red Flags

• EPS growth YoY < 0

• Revenue growth YoY < 0

• Profit Margin < 5%

• Debt/Equity > 1 (or use Net Debt/EBITDA if available)

• Return on Equity (ROE) < 5%

🚫 Short Squeeze Risk Management

• Short Float < 10%

• No recent large price spikes (you can visually filter these out when reviewing)

💰 Valuation Stretched vs. Weak Performance

• Price/Sales > 8 (flagging expensive names)

• EV/Sales > 10 if available

• Market Cap > $500M (avoid microcaps with squeeze risk)

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✅ Why this Combo Works

• Catches both fading hype stocks (e.g., high valuation, declining performance) and broken momentum names (technicals lining up).

• RSI range of 30–45 avoids the false signals from oversold bounces but still catches names that are losing strength.

• Keeps you away from heavily shorted, dangerous setups.

Three Solid Short Candidates

As it turned out, that screen kept us away from everything, as it yielded 0 results. But when I scrapped Price/Sales and EV/EBITDA (I didn’t see EV/Sales on Chartmill), we got 5 names. Of those, the AI liked 3, after looking at all the charts.

So we’re going to place bearish options bets on those three today. The maximum downside on these trades will be losses of 100%, and the maximum gains will be multiples of that.

Details below.

Today’s Bearish Trade #1