Stocks got off to a rough start to the week as all four indices moved lower on Monday. They dropped at the open and remained in negative territory for the entirety of the day. The Russell suffered the biggest loss at 0.91% and it was followed by the Nasdaq with a decline of 0.78%. The S&P and Dow experienced more moderate losses of 0.48% and 0.43%, respectively.
Once again six of the 10 main sectors moved lower and this time it was the materials sector that suffered the worst loss at 1.15%.
[hana-code-insert name=’adsense-article’ /]The communication services sector fell 0.87% and that was the second worst move lower.The four sectors that gained ground all moved up between 0.11% and 0.15% with the biggest moving being for the consumer discretionary sector.
Consumer staples and utilities both moved up 0.13%.
My scans stretched the string of negative readings to four with 74 names on the bearish list last night and only three on the bullish side.
Once these results were added in to the equation the barometer fell to -51.6 from -32.7.
Today’s trade idea is from last night’s bearish list and it is on Phillips 66 (NYSE: PSX). The company doesn’t have terrible fundamental ratings with an EPS rating of 46 and an SMR rating of a B, but the chart was what got my attention.
The chart shows how the $98.50 to $99 area acted as resistance back in March and April and it appears to be doing so again. The stock moved up to $98.54 yesterday, but then reversed and closed considerably off that high reading. The oscillators are both at extremely overbought levels and the stochastic indicators made a bearish crossover yesterday.
Buy to open the August 100-strike puts on PSX at $5.20 or better. These options expire on August 16. In order for these options to double the stock will need to drop to $89.60. The low in May was down near the $80 level so it won’t have to get anywhere near that for these options to double. I suggest a target gain of 100% with a stop at $99.
— Rick Pendergraft
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