2 Stocks to Avoid on the Dead Cat Bounce

NEW YORK (TheStreet) -- Investors often take a low P/E ratio, coupled with billions of dollars in revenue, to mean value play. While this is sometimes the case, the opposite frequently holds true. Don't let hollow upside, aka a dead cat bounce, make you take a long-term leap in these two dying stocks floated by dying companies with dying brands.

J. C. Penney(JCP) . If you day trade stocks or make other types of short-term trades, there's no better move than getting long a stock like JCP after it gets clobbered.

After falling off of a cliff at the open last Wednesday, JCP found a bottom Friday and ended up more than 1% on an otherwise down day for the market. This pop erased very little of 20%-plus decline JCP experienced on an abysmal earnings report. While there might be more upside in store, it's upside I would only be willing to trade. A dead cat bounce does not equal long-term opportunity.

Newser, via the TheStreet summarized one of the reasons why Ron Johnson's plan to turn J. C. Penney around simply will not work:

J. C. Penney's new plan -- stop offering huge markdowns on inflated, "fake prices" in order to offer "fair and square" pricing -- sounds good in theory. Prices start at least 40% lower than they had been, with no need for customers to take advantage of sales or coupons to get the lowest price ...

"The consensus ... seems to be that the J. C. Penney makeover is shaping up as a major flop," writes Brad Tuttle in Time.

Why? Shoppers like coupons and sales. JCP CEO Ron Johnson thinks this problem can be solved by "educating" shoppers about the new, fairer pricing strategy, but they don't want to be educated, Tuttle writes: They want "that 'Wow! What a deal!' high" that only markdowns bring, and that high can usually be found at an establishment right next door to your local J. C. Penney.

Well-stated. But, there's more.