Stock markets and indices have dipped deep into bear market territory affected with COVID- 19, with industries like the hotel and travel industries nearly shut down, hoping for bailouts from the government. Despite this, there are still overvalued stocks and indices despite some minor contractions in the market. Two-thirds of fund managers say stocks are still in a bear market and there are still lots of opportunities for shorting. Shorting is a popular trade technique among numerous investors, gamblers, and individual investors. Markets are easily affected by unpredictable events, and most investors are now taking advantage of declining needs. In this article, we will talk about short selling candidates and underperforming stocks that operate in industries that are in secular decline.

Tesla: Even the CEO question TSLA pricing

Tesla, Inc (formerly Tesla Motors, Inc) operates through two segments: Automotive, and Energy generation and storage. The global auto industry has been devastated by the economic shutdown and according to some predictions, auto production volumes will decline by 23% in 2020. Despite this, Tesla stock is up more than 135% since March 2020. Morgan Stanley is one of the well-known investment banks that sees TSLA as a very good example of an overvalued stock that can be an opportunity for shorting.

On this chart (the period from December 2019), I marked major support levels that can help traders to understand where the price could move. The current support level is 700 USD and if the price breaks this level it would be a “SELL” signal and we have the open way to 650 and 600 USD. If the price breaks 600 USD which represents very strong support, the next target could be located around 500 USD. Where do you think Tesla is heading in the coming months? Will we see another test of All Time High (ATH) or will TSLA break down through all support levels and reach new lows instead?

Amazon: From super high profits to a loss

Amazon.com, Inc. offers a range of products and services through its Websites. Amazon is an example of how a good company can be expensive stock for investors. The fundamentals of the company are good but with 1230 billion USD market capitalization this company/stock is too expensive according to many traders. Despite this, Amazon stock is up more than 50% since March 2020 and AMZN shares can definitely be an opportunity for shorting according to some analysts that lowered the target price to 1840 per share.

On this chart (the period from December 2019), I marked major support levels that can help traders to understand where the price could move. The current support level is 2 200 USD and if the price breaks this level it would be a “SELL” signal and we have the open way to 2 000 USD. If the price breaks 2 000 USD which represents very strong support, the next target could be located around 1 700 USD. Currently, Amazon estimate a loss for Q2, 2020 due to over $4 billion extra in shipping and staff costs during the first months of the coronavirus crisis. Today, Amazon is trading at over 114 times their P/E. Without doubt, it's one of the highest valued companies in the world right now – but is the company really worth this much during a quarter when they lost $4 000 000 000 in revenues?

Delta Air Lines: Huge costs ahead, minimum demand

Delta Air Lines, Inc. engages in the provision of scheduled air transportation for passengers and cargo. Air transportation has been devastated by the COVID – 19 and according to Delta Airlines Inc CFO Paul Jacobson, it could be three years before the sector sees some sense of “normalized demand”. This stock has weakened more than 50% since the beginning of the March but we can still not see the light at the end of the tunnel. On this chart (the period from December 2019), I marked major support levels that can help traders to understand where the price could move.

The current support level is 20 USD and if the price breaks this level it would be a “SELL” signal and we have the open way to 18 USD. If the price breaks 15 USD which represents very strong support, the next target could be located around 10 USD. Will DAL continue down, or is a turnaround likely due to a bailout from the American government? Nobody knows yet, but the short sellers are likely more than the buyers right now.

4. Apple: A bit overvalued considering Covid-19?

Apple Inc. manufactures mobile communication, media devices, personal computers and portable digital music players. The fundamentals of the company are good but with 1357 billion USD market capitalization this stock is overvalued in my opinion. Despite this, Apple stock is up more than 40% since March 2020 and this stock that can be an opportunity for shorting. According to some predictions, the global economic shutdown may have put that smartphone upgrade cycle on hold. Some analysts also say that many short sellers may simply be using an Apple short position as a hedge on long positions in other tech stocks.

On this chart (the period from December 2019), I marked major support levels that can help traders to understand where the price could move. The current support level is 300 USD and if the price breaks this level it would be a “SELL” signal and we have the open way to 270 and 250 USD. If the price breaks 250 USD which represents very strong support, the next target could be located around 200 USD. Recently, 2 analysts lowered Apple shares to sell and another two to underperform. During a prolonged Covid-19 crisis, many people will likely wait to buy a new iPhone, MacBook computer or other apple products. The median forecast estimate that Apple will be worth $320 one year from now, while the low estimate is coming in at $195 per AAPL share.

What about U.S. stock Indices?

U.S. stock Indices edged lower this Tuesday as a drop in crude values pointed to a lack of demand for commodities and slowing economic growth around the world. The Dow Jones Industrial Average DJIA fell 390 points, or 1.59% at around 24,206, the S&P 500 index SPX fell 30 points, or 1.04%, to 2,922, while the Nasdaq Composite Index COMP fell 49 points, or 0.5% at 9,185. U.S. stock Indices are still under the pressure as Americans continue to contend psychologically with the COVID-19 pandemic.

The S&P 500 index is trading currently around 2 922 points, the current support level is 2 700 points and if the price breaks this level it would be a “SELL” signal and we have the open way to 2 500. If the price breaks 2 500 points which represent very strong support, the next target could be located around 2 200 points. We have seen an extremely long period of gains for the American indices and perhaps it's time for some downturn now again, before we see a really good year in the second half of 2021?