This morning in the "Hot List" on PremierMarkets we've been commenting on how things continue to soften in stocks. However, I'm also noticing that bond YIELDS are NOT diving as we have sometimes seen in recent past. This tells me I should not be aggressively shorting every stock in the marketplace, but selectively and slowly adding some short positions that offer resistance levels close by. I think a good example of this was this morning highlighted short-trade in shares of Laboratory Corp (NYSE:LH) at $116.
Laboratory Corporation Chart - 60-minute interval
Shares of LH are currently trading down 3.65%, while the Biotechnology Index (BTK.X) is down 2.87%. I'm using the index and the stock to help me control my trade. It gives me confidence in a bearish trade to see the stock weaker than a corresponding index as it gives me the observation that I'm short a stock that is currently weaker than a like index. Our day traders target was 110. Traders can now move stops down to just above the opening tick in this stock at $116.70. Those that shorted per our "hot list" alert at $116 are now risking $0.70 of principle.