Death of the Permariser

There are several ways to play the next leg of the bear market. One is the walking dead. These are stocks and funds such as ARKK (I choose because it's been beaten down, I haven't look at it as a new target yet) that lose all support in the capitulation wave down. These are companies or funds filled with companies, that can conceivably have a target near $0.00 without some positive force. Another one I haven't examined: DOCU. Maybe there is more to their business, but signing documents online seems like something that other companies can offer. I don't like these myself though, mainly because the puts are expensive. In-the-money puts can be profitable, but OTM puts offer a terrible risk/reward setup.

For better risk/reward, one potential category is the defensive sectors and permarisers. These are companies and sectors that have outperformed. My favorite example right now is Hershey's (HSY). The stock made a new all-time high in August. You can plainly see the lifetime support line, the accelerated support line from 2009 and the even steeper ascent from 2020. It is a 30 percent trip down to the 2009 support line and 50 percent down to the lifetime support line. If I'm right about this bear market, Hershey's will start experiencing a rapid drop once this current trendline is lost.

These are tough plays because until they crack, they keep rising. Timing is everything with these, but many permarisers have turned to trash in this bear market. Paying 25 time earnings for a company growing earnings at 10 percecnt isn't value and it isn't defensive. Eventually, these stocks will be dumped.