Clorox (CL) heading lower but outperforming its Competitors

Over the last couple of days, Clorox (CLX) has been on my watch list. I am looking for more stocks to short sell to protect my portfolio from a possible future downwards price move.

The Clorox long-term chart is below (as of 17-Nov-2017):

Its overall performance throughout 2017 has been mediocre in comparison to the entire market, but it did not show a major downtrend for most of the year. This might be about to change.

There are several signs of a potential reversal:

  • Newer price peaks are lower than previous peaks
  • Bearish x-over between the long-term and short-term trend lines
  • The strong support line has been breached in September

But compared to its competitors, CLX is not doing so bad…

Clorox is part of the Consumer Staples Sector. This sector has not performed well this year, but let’s have a look at the sub-sector (household goods) and Clorox’s direct competitors:

While at some point being the worst performer in this subgroup, CLX actually shows signs of outperforming its competitors. The performance chart shows that in mid-October it outperformed CHD, and by end of October also KMB.

It also outperformed the average of the 4 stocks.

How to short sell CLX (if you dare)

It’s important to realize that for every stock that you sell short (thinking it will go down in price), there is a buyer who thinks the opposite (it’s cheap hence a buying opportunity).

Such trades can go in either direction, depending on supply and demand. That’s why it’s important to set a correct stop loss.

Here’s my trade setup:

  • Short sell price: 133.50
  • Stop loss: 138.00 – 138.50
  • That means the risk per share is $5
  • With a 100 k$ portfolio and 1% risk per trade, that means risking $1,000 => 200 x $5
  • Number of stocks to short sell: 200

The idea of putting the stop loss at 138.50 is that if it reaches this price, it surpasses the previous peak. That’s an indicator of a new uptrend, so that’s when I would want to bail out.

A quick market trend update

Rather briefly, here are the changes in sector trends:

It looks like the Energy Sector is the biggest loser, but I would caution about that.

While it looks as if there is a steep change in uptrends for energy companies, look what is happening with the downtrends by sector:

With previously 61% of energy companies showing a downtrend, this has now dropped to 48%… as massive change for the better.

The reason is that many energy stocks are on a sideways trend right now. Based on the last few weeks of data, I think this will turn into a more solid uptrend over the next few months.

That’s all for now! Happy trading!



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