Wednesday’s trading was a little odd in terms of the indices. Three of the four moved higher while the Dow suffered a small loss—0.95 points which is essentially no change in percentage terms. The Russell led the way with a gain of 1.31% and it was followed by the Nasdaq with a gain of 0.92%.
The strange developments came from the Dow and the S&P. Both indices were experiencing solid gains, but sold off sharply in the last hour. The S&P did manage to hold on for a gain of 0.30%, but both it and the Dow were up over 1% heading in to the last hour.
[hana-code-insert name=’adsense-article’ /]Seven of the main sectors gained ground on Wednesday and the energy sector led the way with a gain of 1.57%.The communication services sector (1.19%) and the consumer discretionary sector (1.05%) were the only other two sectors to gain over one percent.
The utilities sector was the worst performing sector with a loss of 1.48%.
The other two defensive sectors joined utilities as the only three to lose ground on the day. Consumer staples lost 0.80% and healthcare lost 0.57%.
My scans reversed course on Wednesday with 27 names on the bullish list and 17 names on the bearish side.
Despite the bullish skew, the barometer dipped in to negative territory with a reading of -2.6.
With the two lists being relatively close in numbers, it was tough to choose the trade idea for today, but in the end it was a bearish name that looked like the best opportunity to me. US Silica Holdings (NYSE: SLCA) appeared on the bearish list and its fundamental rankings were mixed. The EPS rating is below average at 33 while its SMR rating is slightly above average with a B.
The chart sealed the deal for me. As you can see the stock has been trending lower over the last six months and a trend channel has dictated the different cycles within the downtrend. The stock is close to the upper rail at this time and the daily stochastic readings are in overbought territory and have just made a bearish crossover.
Buy to open the January 2019 $16-strike puts on SLCA at $2.15 or better. These options expire on January 18. For these options to double, the stock will need to drop to $11.70. That is below the most recent low, so you will want to keep an eye on the stock around the $13.00 area to see how it behaves. I suggest a target gain of 100% with a stop at $15.80.
— Rick Pendergraft
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