The market and individual stocks in general continue to get pounded so my screens will continue to provide us with short candidates or stocks trending lower. Today’s screen gives us five stocks that show the 10-week moving already below the 30-week moving average and two stocks headed in that direction.

Recent stocks trending down:

• 10-Week Crossing Below 30-Week Moving Average
• Hurting Stocks to Short?

10-week average below the 30-week average:

• CMTL – 42.59, the stock dropped $4.66 on Friday on volume 147% larger than the average. We also witnessed a large reversal at the 30-week moving average as the 10-week moving average continues to move lower.
• VE – 75.43, the stock was down 15.29% last week with volume 350% larger than the 50-d m.a. on Friday (it was the largest weekly volume in years).
• MR – 30.99, one of the top performing stocks on this blog in 2007; but it is now facing some trouble as the 10-week m.a. is below the 30-week moving average. Volume is starting to increase during distribution weeks.
• MORN – 60.95, the stock failed to complete the $60-$100 run as the 10-week m.a. is now below the 30-week moving average. Volume is increasing with multiple distribution weeks over the past four months.
• SI – 123.53, Siemens is falling on above average volume with a recent reversal at the moving averages. Both the 10-week and 30-week moving averages are trending downward.

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In keeping with last night’s theme, I will highlight five stocks that are trending downward on above average volume after reaching 52-week highs within the past six months.

Tonight’s stock charts show a declining 10-week moving average that is now trading below the 30-week moving average. The 30-week moving average is just starting to point downward in most of these charts. Trader Vic wrote in his book:

• “When the 10-week moving average crosses the 30-week moving average and the slope of both average is down, this comprises a sell signal, provided prices are below both moving average line”
• “Of course, as with all technical observations, these observations are never right 100% of the time.”
• “The biggest mistake anyone can make in using moving averages, or any technical observation for that matter, is to fall in love with it”

With that said, I will admit that I love using the 10-week/30-week indicator when looking for longer term trend changes and buy/sell signals.

Tonight’s stocks include:
DECK – 105.23 - hat tip to Mike in comments
GME – 45.23
CETV – 84.80
YZC – 76.46
ALXN – 59.20

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Today’s stocks look poised to fall further from their recent 52-week highs. All five stocks were down on above average volume Tuesday as they trade below their long term 200-day moving average. Volume is increasing on both the daily and weekly charts as they continue to log lower highs and lower lows.

Add to the fact that they are all several months removed from their 52-week highs and we have PRIME candidates for shorting or put options (whatever your forte).

I detailed the characteristics of longer term shorts in the two blog posts below. The rules in these posts are the exact ones I follow for longer term shorting (I lean towards put options). Remember, I am not day trading for quick profits; I am looking for trends that will last from weeks to months.

• Setups for Selling Stocks Short
• How to Make Money Selling Short

*Disclaimer: These stocks are not trade recommendations; they are purely provided as equity research. Please do your own due diligence and consult a financial advisor before trading (especially shorting).

• CETV – 84.00, the stock was down 9.44% today on volume 764% larger than the average. We will go on to have the largest weekly volume in years by the time the market closes Friday. Lower highs and lower lows with the stock breaking below the 200-d m.a. shows tremendous weakness. A drop to the $66 area and then $55 is not out of the question.
• NUVA – 33.55, the stock was down 4.39% on volume 595% larger than the average. The 13% drop this week has taken the stock below the 200-d m.a. on the largest volume in years. Heavy institutional distribution.
• FLIR – 26.36, the stock was down 9.35% on volume 137% larger than the average. Today’s move took the stock below the 200-d m.a. on heavy volume, the largest in months.
• IBN – 46.91, the stock was down 6.70% today on volume 113% larger than the average. Four consecutive down days has led the stock below the 200-d m.a. on increasing volume. Lower highs and lower lows has been the recent trend.
• YZC – 77.40, the stock was down 7.37% on volume 99% larger than the average. Lower highs and lower lows is the trend as the stock could be headed towards the $64 area and then $50 if the trend continues.

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The weekly chart of Chipotle Mexican Grill (CMG) is starting to breakdown in a similar way that CROX broke down but the institutional numbers don’t support the down side as strongly as it did with CROX. The number of shares sold exceeded the number of shares bought by 46% when I highlighted CROX as a potential breakdown stock back in September in the post titled “Will CROX get Eaten?”

“Recent churning action below $60 per share shows that buyers are no longer in control of the stock. However, sellers haven’t completely gained control either. It is a tug-of-war between supply and demand as we await the ultimate direction of the next trend for the heavily covered Crocs Inc. (CROX).”

The difference here is that CMG has only recorded a 19% increase in shares sold versus shares bought which is not excessive. However, the stock has violated the 200-d moving average for the first time since the long up-trend started. We can also see the first violation of the relative strength versus the S&P 500 suggesting that the stock is no longer a leader and may fall victim to increased institutional selling.

Yes, the current fundamentals look strong but CMG posted a fourth-quarter profit that missed Wall Street’s expectations and said 2008 would remain challenging, raising some red flags in my opinion. They could be playing it cautious or they could be signaling the beginning of the end of this particular run.

The stock is 32% off of its all-time high and has been falling on increasing volume as it violated the long term moving average. I am not shorting at this spot but I will jump on puts about six months out on the first failed attempt to make new highs above the 200-d m.a.

Listen to what the Institutional Buyers are Saying (with their actions):
Total Held by Institutions: 386
Money Market: 182
Mutual Fund: 200
Other: 4

New Positions: 107
Positions Sold: 58
Shares Held: 29.28 mil
Shares Held Previous Period: 30.12 mil

Shares Bought: 4.31 mil
Shares Sold: 5.16 mil
Value of Shares Bought: $554.8 mil
Value of Shares Sold: $663.9 mi

• The number of shares held has decreased by 3%
• The number of shares sold exceeded the number of shares bought by 19%
• The value of shares sold was $109 million more than bought

It took a couple of months but CROX did get Swallowed and it all started with the small and subtle red flags that we are starting to see with CMG.

“I wrote a post titled Will CROX get Eaten? on September 20, 2007 and strongly noted the declining institutional support (see numbers below). Someone was jumping out of the stock and we now know why!”

“Stocks only churn when buyers and sellers are struggling to take control. More often than not, stocks churn because BIG institutions are selling shares to the small retail buyer (the sucker). Institutional numbers and charts that back them up don’t lie! The big boys can’t hide if you know how to read them.”

The Inverse ETFs that I highlighted in October are really paying off with an average three month gain of 21%. I will admit that I didn’t buy any of them but I know several readers that were real excited about their potential and their ease of use.

Many traders are turned off by the complexities of shorting or just don’t feel comfortable about the process so Inverse ETFs present them with a simple solution. Trading Inverse ETFs allows traders to place an order that mimics the buying and selling process of a regular stock but you are now betting the short side instead of the long side. These trades allow the investor to ride the market down without the complexities or uncomfortable jitters of shorting.

As I wrote in October, Inverse ETFs are specifically designed to move in the opposite direction of the underlying market index. Thus, if the Dow Jones Industrial Average declines by 1 percent, its inverse ETF (the Short Dow 30 ProShares Fund, symbol DOG) will rise by 1 percent. When the S&P 500 falls by 1 percent, the Short S&P 500 ProShares Fund (SH) will rise by 1 percent.

Take a look at the gains of the four ETFs I highlighted prior to the market opening on October 17, 2007:

• DOG: 17.47% peak gain this week
• SH: 19.21% peak gain this week
• PSQ: 22.83% peak gain this week
• RWM: 23.07% peak gain this week

I don’t recommend jumping into these ETFs right this moment (the previous opportunity was in October when I presented them) but keep an eye on the market and look to pounce when the major indexes bounce higher and start to show overbought signs. Be patient just as you would with trades on the long side.