A Classic Case of Relative Weakness: Why I’m Watching TEM on the Short Side

 Here’s a stock I’m watching closely for a potential short, and it’s a great example of why I always keep relative strength front and center in my analysis. Above is a 60-minute chart of TEM. In the middle pane I have the SPY for market context, and in the lower pane is a ratio line comparing TEM to SPY. Right away, the message from the chart is clear.

The SPY is pushing to a new high, yet TEM is doing the exact opposite. Instead of confirming the market’s strength, TEM is making a much lower high. This is a textbook example of relative weakness. When the overall market is strong and making new highs, but the stock you’re watching can’t even keep pace, that should immediately grab your attention. To me, that’s the market quietly telling you where money is not flowing.

The ratio line really drives this point home. It’s been in a clear downtrend, and more importantly, it has already broken down to a new swing low before price has done the same. This is one of the biggest clues I look for. Relative weakness often shows up in the ratio line first, and price tends to follow later. When I see the ratio making new lows ahead of price, I start thinking in terms of downside risk rather than upside potential.

As far as execution goes, I’m not interested in guessing. What I want to see is confirmation. In this case, recent support sits around 61.55. A clean break below 61.50, in my opinion, could open the door to continued weakness in the days ahead. That level is important because it represents the line in the sand where buyers have previously stepped in.

What makes this setup even more compelling is the broader context. This weakness is occurring while the overall market is rising. If TEM can’t hold up in a strong market, just imagine what might happen if the market starts to roll over. That’s why I’m keeping this one on my watchlist. For now, I’ll stay patient, wait for support to break, and let the market confirm the short before taking action.

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