CHRW and R (Short)...

I've got a pair of shorts tonight. Normally, I wouldn't combine two picks in the same post, but I am here. The reason is both are truckers and both have similar charts and both reported earnings today. CH Robinson Worldwide and Ryder both disappointed the markets today with their earnings and both look destined to fall. In the short term, I believe CHRW has better downside, but in the long term, I believe R has better downside. So, I'd be inclined to end up taking a combined full normal position size for me, but divided in half between these two. If a position for you is normally 10% of your portfolio, I'd commit 5% to both names to reach 10%, for example.

The technical setup is pretty straightforward here. We have two stocks who broke their 200-day EMAs on heavy volume and left gaps behind. Furthermore, we have two stocks who broke down out of multi-month bases, leaving a lot of overhead resistance behind. These are decisive breakdowns, and I expect any effort to rally will be met with aggressive selling and shorting. Transports in particular are a good place to look to short if you are bearish on the economy and/or expect a double-dip scenario to play out (which I am and I do). Even if you disagree with that and have your portfolio positioned accordingly, a short in either or both of these through puts would provide a nice hedge.

As for the options, I'm looking for a multi-month decline, so I'm willing to go a bit further out in time, but I also believe there will be a more immediate decline following a little relief rally. So, in CHRW, I'm looking at some more near-dated contracts, say a put spread involving the purchase o the February $55 puts and sale of the February $50 puts. Going a bit further out in time, I'm looking at creating another call spread involving the May $55 puts and the aforementioned February $50 puts. I'll of course look to enter the buy leg on the rally and enter the sell legs on the drop. R is a bit trickier because its chain has wider bid/ask spreads. I think R is going to get some strong support around $30, so I'd be inclined to sell puts around the $30 strike. For instance, I'd consider buying the May $4o puts and then looking to sell the May $30 puts.






Position: None

Disclaimer: This is not a recommendation and is presented for informational purposes only.