Do You Own These 10 Vulnerable Stocks?
In This Digest:
- The worst week for stocks since the tariff tantrum
- Why you need to get your house in order now
- This 40-year trading veteran is sending an important data-driven warning
- 10 vulnerable stocks to watch if the selloff continues
- This stock just flashed a rare, powerful Snapback signal
Is the Mega Melt-Up turning into a meltdown?
Last week saw the worst run for stocks since April’s Liberation Day plunge.
The S&P 500 slid more than 3%. The tech-heavy Nasdaq 100 fell nearly 5%. And popular growth stocks saw even steeper drops.
Trading and gambling hub Robinhood (HOOD) dropped nearly 18%… language earning app Duolingo (DUOL) fell more than 30%… and nuclear energy company NuScale Power (SMR) plunged by about 38%.
DUOL’s drop came after result of poor earnings reports. But HOOD and SMR saw the brunt of these declines well before their numbers came out.
As our CEO Keith Kaplan wrote to you about in Friday’s Daily, it’s not yet clear if the Melt-Up that began in 2023 is melting down.
The reasons why we’re seeing this risk-off shift are, as always, hard to pin down.
But frankly, the reasons don’t matter.
What’s critical right now is that you put a risk management plan in place to protect your gains. Even if the bull market rages for many more years, it will be worth your time.
Because it’s easy to get caught up in FOMO (fear of missing out) when times are good.
But if that causes you to plunge into the market without a risk management plan in place, it will destroy you.
At TradeSmith, we have risk management in our DNA…
The first software tool we built was TradeStops. It helps you set up a simple and effective risk management policy on any stock you own.
It does that by looking at a stock’s historical volatility and using that to recommend a specific sell price.
Every stock has its own rhythm – what we call its “Volatility Quotient,” or VQ. Some swing 10% in a week… others hardly budge. Our system watches those moves and tells you when a stock’s gone too far off its usual beat – that’s your cue to sell.
Instead of a one-size-fits-all rule, it sets a custom trailing stop-loss for each stock you own.
Stop losses are automatic sell orders that trigger at a certain price. Trailing stops are even better – they climb along with the stock price.
That way, you can hang on to strong but more volatile stocks longer – without getting shaken out too soon.
It’s how Keith famously sold most of his stocks on February 28, 2020 just days before the Covid Crash…
Back then, TradeSmith flashed a Bear Market signal on all the major benchmarks at once, even though the S&P 500 was only down about 12% from its highs at the time.
Moments like that are what reinforce how powerful TradeSmith’s software is… and how important risk management is.
If you are a TradeStops subscriber and you haven’t yet added these stop losses to your portfolio, now is a great time to do it.
Log onto TradeSmith Finance and sync your portfolio. See what the recommended stop-loss levels are for your holdings. If stocks you own have crossed below those levels, consider taking at least partial profits to reduce your risk.
Getting your house in order isn’t what anyone would call fun. But it’s essential.
And it’s especially important in a melt-up.
The higher stocks climb, the more fast and ferocious the eventual downswing will be when it comes.
But it’s not all about protecting your downside risk.
Bear markets are also wonderful times to profit — if you know how…
That’s according to TradeSmith’s veteran trader, Jeff Clark.
Over his nearly 40 years as a trader, he’s developed a reputation for thriving during extreme volatility.
His called the 1987 crash, the dot-com bust in 2000, the 2008 financial crisis, and the 2022 tech meltdown.
And he didn’t just warn readers ahead of these events. He cleaned up throughout them.
In 2008, he recommended 26 different trades that returned 100% or more to his subscribers. That also happened to be the year after Jeff closed his money management firm and started publishing his work to readers – another sign of adept market timing.
He did even better in 2022 bear market – with 46 recommendations that doubled and even tripled.
I know that might sound odd. After all, bear markets are wipeouts for most buy-and-hold investors.
But for short-term traders like Jeff, they’re opportunities.
Because the bigger the moves in stocks – in either direction – the bigger the potential profits.
We don’t have to look back far for a recent example.
Jeff was bearish on stocks ahead of this year’s Liberation Day crash. And he was ready for that quick meltdown.
From April 4 through May 7, he went on a five-trade winning streak with gains of:
- 76% in four days on Citigroup (C)
- 91% in four days on Marvell Technology (MRVL)
- 90% in two days betting against Citigroup, Marvell Technology, and Dell (DELL)
- 81% in nine days on the Valkyrie Bitcoin Miners ETF (WGMI)
- 97% in one day on insurer Oscar Health (OSCR)
Jeff is not a FOMO kind of guy. He’s happy to sit on the sidelines until a better opportunity arises.
How does he find those opportunities?
He uses a “Doomsday Signal” that seeks out stocks that are wildly overstretched to the upside. And right now, it’s flashing on Apple (AAPL), Tesla (TSLA), and dozens of other popular stocks.
This isn’t just a warning. It’s also an invitation to trade alongside with Jeff as this signal plays out. Learn more about his Doomsday signal and his plan to trade it over the next few weeks here.
Do you own these 10 vulnerable stocks?
Recently, TradeSmith debuted a new trading indicator called Short-Term Health.
It’s similar to our Long-Term Health indicator, which shows whether stocks are in healthy uptrends or perilous downtrends. But it’s more tuned to short-term moves that are good for swing trading… or seeing if a stock is getting caught up in a patch of volatility.
In a backtest we did across the S&P 500, when a stock was in a Short-Term Health Green Zone, it returned 13.7% on average. When it slipped into the Short-Term Health Red Zone, indicating bearish momentum, the average return was negative 4.3%
With this in mind, here are 10 S&P 500 stocks that recently entered the Short-Term Health Red Zone, while also seeing falls last week that exceeded that of the S&P 500.
Four of the 10 entered over the past five trading days. The whole list includes names like cruise company Norwegian Cruise Lines (NCLH), communications equipment company Motorola Solutions (MSI), payments giant PayPal (PYPL), ticket-seller Live Nation Entertainment (LYV), and tech giant Meta Platforms (META).
If you own these stocks, they’re worth a closer look in your portfolio for risk management. If you don’t, they could be good candidates for bearish option trades if this selloff gets nastier.
On the flipside, a rare and powerful Snapback signal just fired…
Earlier this year, we released our Snapback signal strategy.
This signal targets stocks in steep selloffs amid what are already bad downtrends. You buy these stocks when they’re so beaten up the sellers have done about as much damage as they can do.
It’s a rare signal, but a strong one. During strong bull trends like we saw through October, it’s unusual to see any Snapback signals fire. But the results for this signal going back 10 years make it an essential tool to follow.
Over the past 10 years, the Snapback signal has fired 342 times across all S&P 500 stocks.
Over the next 21 days, 78.2% of these signals have been winners for an average gain of 15.8%.
So far in 2025, that average 21-day return would outperform the S&P 500 for the entire year. That’s worth paying attention to.
There are two active signals right now. Let’s look at one that triggered last Tuesday, Nov. 4 in fintech firm Fiserv (FI).
On Nov. 4, FI met the conditions for a Snapback signal. So it’s the one TradeSmith deems most likely to recover quickly from such a drastic drop.
In the few days after, the stock traded lower but started to recover on Friday. That’s the latest green candlestick below:
If FI is anything like the hundreds of other cases we’ve backtested, it stands a good chance of trading positive by the time the signal is up on Friday, Dec. 5.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily