Here’s the short story on Penn National Gaming ($PENN) (March 29, 2021)
PENN
Let’s look at Penn ( NASDAQ: PENN ) and see how this short unfolds. This is a stock that at Stock Market Mentor we have been looking at, trading, making money on it for a while. It came down here fine, but there wasn’t much to it. Once it started to flirt with going below the 50, which it has done here, you know that it’s time to kick this thing to the curb.
Now I am talking about not looking at this as an entry anymore, sorry Dave Portnoy, I apologize, but I am not looking at this as an entry, I am looking at this as a potential short. The stock had a heck of a move since even coming out of this, I wouldn’t really call it a cup and handle, it is definitely a defective cup there, but since it popped out of this consolidation at $76.00, this thing almost doubled, it went up like 85 percent in 3 months. And so this is something to be reversed, this is a reversed pattern.
What we are looking to do is, at least sell the stock. I would sell this on any kind of a rebound if you haven’t already. But if you are looking to short the stock you do not short the stock here. Don’t look at the stock and say, “Oh, it broke below the 50, I am going to go ahead and short it here.” You are not going to see the stock just fall straight down, it doesn’t do that. What you want to be doing is, you want to just be sitting and stalking this, just waiting for this. Remember, this is still a stock that is in an uptrend. Look at where the 200-day moving average is, look at the weekly chart. This stock has been in a nice uptrend but you can absolutely see how this has rolled over.
There is still going to be a lot of buying interest in this stock. Why? Because that’s what people do. You will get the lowest common denominator and hopefully, that is not you but it might be, in which case, you won’t take offense because you won’t think I am talking to you. You will get the lowest common denominator who looks to see how this thing has run up and they will be buying every dip with reckless abandon, just absolutely fearless. Not really noticing that the stock had been trading to such an extent above the 50-day moving average that it didn’t even test it. It didn’t even test the 50-day moving average but then when it fell down here this was a shot across the bow.
I am pretty sure I even mentioned this at the time, this is a shot across the bow pattern; it’s the first indication that something is wrong with the stock. But then, oh, it’s all good, danger past, oh, that must have just been a blip, somebody must have stepped away from their desk and missed the opportunity to buy. And then, at some point later when you see this happening you say, huh, well this was actually the first indication. This was the first indication back here that something was wrong that only now we are seeing here, this is a shot across the bow. And so where are we now? We are at a breakdown and then a recovery and then a failed recovery.
So what we are looking for next to short this stock is, you want to see the stock run a bit higher and then fail. If it gets up to this red line and rolls over, boom, that’s your short right there. Why? Because then you can place a stop right up here. You’ve got a tight stop just like when you are buying stocks that are trending up, you want to be buying as close to support as you can so you know where to put your stop. Similarly in shorting, you want to be selling as close to resistance as you can so you know where to put your stop.
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