Shaw Group Inc. (SGR) is a former high flying stock that seems to have lost its mojo. In July, the stock gapped up after a long uptrend, but could not hold the gap level. It now looks like the gap was an “exhaustion gap“, which usually comes at the end of an uptrend and signals a downswing.
SGR is in the midst of what could be a “dead cat bounce.” As a short play, I like the fact that the bounce towards the 50 day moving average has been on low volume. Take a look at the recent volume pattern I highlighted on the chart; lots of high volume down days sprinkled with a few low volume up days. This is a bearish volume pattern.
This is a great short play that I wish I had entered at the close today. If I see price strength on weak volume, I will likely give it a go tomorrow (as long as price does not cross the 50 day moving average without moving back down).