The week ended on a whimper Friday with all four indices moving lower on the day. The Russell took the worst hit with a drop of 0.87%. The Nasdaq fell 0.52% as the second worst performer while the S&P (-0.16%) and D0w (-0.07%) suffered much smaller losses. Despite the losses on Friday, all four indices moved higher on the week.
The sectors were evenly split on Friday with five moving higher and five moving lower. The utilities sector was the top performer with a gain of 1.05% and that was by far the best performance.
[hana-code-insert name=’adsense-article’ /]The second best performance was a gain of 0.22% by both the financial sector and consumer discretionary sector.The biggest decline belonged to the tech sector at 0.87%.
The sector was dragged down by semiconductor stocks after Broadcom (AVGO) lowered its forecast as the trade war wages on.
The second worst performer was the energy sector with a loss of 0.65%.
My scans turned in their sixth straight negative reading with 30 names on the bearish list and only six on the bullish list.
After the rally from two weeks ago and another small rally this past week, there are far more stocks at or near overbought levels than there are stocks close to or in oversold territory.
The barometer did continue to inch higher on Friday, moving up from -50 to -37.8 once these results were added to the equation.
None of the charts on the bullish list really offered much as far as I was concerned and that left me with another bearish trade idea. The one chart that stood out the most to me was Sabre Corp. (Nasdaq: SABR). The company’s fundamental ratings aren’t all that bad with an EPS rating of 65 and an SMR rating of a B. But it was the chart that got my attention.
We see on the chart how the stock has been trending lower since early December. The high from then connects with the high from April to form a downward sloped trend line and the stock just hit the trend line this past week. We also see how overbought the stock is based on the 10-day RSI and the daily stochastic readings.
Buy to open the July 22.50-strike puts on SABR at $0.90 or better. These options expire on July 19. In order for these options to double the stock will need to drop to $20.70. This is a pretty aggressive trade with only 34 days until expiration and with the options only being in the money by $0.21. But the declines in December, February, and May have been very sharp, so this has the potential to be a big winner. I suggest a target gain of 200% on this trade with a stop at $22.60.
— Rick Pendergraft
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