So much for the relief of the pause on tariffs, that positive news last all of one day. Economic news from China and Germany started the ball rolling and the losses spread around the globe like a highly contagious disease. Then the 2-year and 10-year U.S. treasuries inverted on their yields and the route was on.
All four of the main indices fell at least 2.5%. The Dow (-3.05%) and Nasdaq (-3.02%) both fell over 3%. The S&P dropped 2.93% on the day and the Russell suffered the smallest loss at 2.85%.
[hana-code-insert name=’adsense-article’ /]All 10 of the main sectors fell on Wednesday and only one of them dropped less than 1.0%.The utilities sector was the big winner by only falling 0.82%.
There were only two others that fell less than 3.0% the – staples and healthcare.
The energy sector took the biggest hit on Wednesday, falling 3.92%.
The financial sector got hit hard on the yield inversion news and ended up down 3.71%.
The communication services sector declined 3.55% and that was the third worst loss.
My scans produced a third straight night of negative results last night with 30 names on the bearish list and eight on the bullish list.
The barometer dropped from -7.7 to -22.3 once these results were added in to the equation.
Once again there weren’t any stocks on the bullish list that caught my eye enough to make a bullish suggestion, so for a fourth straight day I have a bearish trade idea for you. Today’s suggestion is on Norwegian Cruise Line Holdings (NYSE: NCLH). The company’s fundamentals are actually pretty good with an EPS rating of 94 and an SMR rating of an A.
The main driver behind this trade idea is the chart. We see that a trend channel has formed over the last three and a half months. The upper rail connects highs from May and July and the stock just hit this rail. The lower rail connects the lows from June and earlier in August. We also see that the daily stochastic readings made a bearish crossover while in overbought territory. The stock declined 14.4% from the May high and over 16% from the July high.
Buy to open the September 52.50-strike puts on NCLH at $4.20 or better. These options expire on September 20. In order for these options to double the stock will need to drop to $44.10. The lower rail of the channel is slightly above that price right now, but should be below it in the next week or so. I suggest a target gain of 100% with a stop at $51.00.
— Rick Pendergraft
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