The indices were mixed on Friday with the Dow and Russell moving higher while the Nasdaq and S&P lost ground. The Russell led the way on the day with a gain of 0.20% and it gained 4.85% on the week, by far the top weekly performance. The Dow gained 0.14% on Friday.
The Nasdaq fell 0.22% on the day while the S&P lost 0.07%. All four indices gained ground for the week, but the Nasdaq was the laggard with a gain of only 0.91%.
[hana-code-insert name=’adsense-article’ /]The sectors were split on Friday with six moving lower and four moving higher.The materials sector led the way with a gain of 1.13% and it was followed by the energy sector which gained 0.83%.
On the downside, the tech sector fell 0.72% for the worst performance and it was followed by the utilities sector with a drop of 0.69%.
The rotation that is going on is an odd one and it will be interesting to see how it plays out.
My scans moved even farther to the negative side on Friday with 126 stocks and funds on the bearish side and nine on the bullish side.
The barometer dropped to -78.2 once these results were added in and that is the lowest reading since June 25.
Given the great number of stocks on the bearish list, you might think it was an easy choice to make today’s trade idea a bearish one, but that wasn’t the case at all. There were several stocks on the bullish list that got my attention, but in the end it was a stock on the bearish list that I felt gave us the best risk/reward potential. Mosaic (NYSE: MOS) was on the bearish list and its fundamental ratings aren’t very good. The EPS rating is a 30 and the SMR rating is a C.
We see on the chart that Mosaic has been moving lower since February and a trend channel has formed that defines the cycles within the overall downward trend. The stock hit the upper rail on Friday and it is in overbought territory. I look for the next downward cycle to take place in the coming weeks.
Buy to open the November Week 1 23-strike puts on MOS at $1.50 or better. These options expire on November 1. In order for these options to double the stock will need to drop to $20. The recent low was below $17.50, so the stock won’t have to break to a new low to hit that target. I suggest a target gain of 100% with a stop at $23.25.
— Rick Pendergraft
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