Short This Tech Blue Chip

by Sam Collins | September 1, 2010 12:01 am

Dell Inc. (NASDAQ: DELL[1]) — This PC maker has been in a bear market since late 2004, when it double-topped[2] at $40. 

In February 2009, the stock hit a bear market low under $8, and then rallied to $17 in September 2009. And following a pullback early this year, it rallied and again topped at $17. 

This double-top led to a serious decline marked by a death cross in late June and a failure to rally above its 50-day moving average[3] in August. Dell is in a bear market with little support in sight.

Traders should consider selling the stock short[4] at current prices or on rallies to the 50-day moving average now at $12.72. The trading target is $8.50 to $9. 

Check with their broker for margin requirements and the ability to borrow stock for a short sale. Selling naked shorts is a violation of current SEC rules.

Selling short is also considered a speculative trade and not suitable for all investors. Short sellers are advised to always enter stop-loss orders in order to avoid unlimited losses.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net[5].

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