Tuesday saw all four indices open in positive territory only to have the Nasdaq and Russell drop in to negative territory early on. The S&P and Nasdaq would fall in to negative territory after Britain’s Brexit vote and the Russell moved back in to positive territory near midday.
In the end, the Russell was the only index to finish in positive territory with a gain of 0.05%.The Nasdaq dropped 0.72% and took the worst loss on the day. The S&P fell 0.36% and the Dow kept its loss to only 0.15%.
[hana-code-insert name=’adsense-article’ /]The sectors were evenly split on the day with five moving higher and five moving lower.Energy stocks led the way with the sector moving up by 1.29%.
The industrial sector tacked on 0.79% as the second best performer.
Tech stocks took the biggest loss on the day with the sector falling 1.35% on the day.
The communications services sector fell 0.97% for the second worst performance.
My scans stretched the streak of negative results to six straight trading days with 56 names on the bearish list and nine on the bullish list.
The barometer dropped from -38.3 to -43.5 once these results were added in to the equation.
After having four of the last five trade ideas be bearish ideas, I really wanted to have a bullish one today, but none of the setups matched what I look for each day. As a result I have another bearish trade idea and this one is on Bausch Health Companies (NYSE: BHC). The stock appeared on the bearish scan and the fundamentals are just average. The EPS rating is a 59 and the SMR rating is a B.
We see on the daily chart that the stock has been trending lower and if we connect the highs from July and September it creates a downward sloped trend line that connects the high from the last few days. The stochastic readings are in overbought territory and made a bearish crossover yesterday. We also saw the indicators make similar moves in July and September, just before considerable drops in the stock.
Buy to open the December 24-strike puts on BHC at $2.35 or better. These options expire on December 20. In order for these options to double the fund will need to drop to $19.30. The stock dropped below that level earlier this month and I think it can get lower. I suggest a minimum target profit of 100% with a stop at $23.50.
— Rick Pendergraft
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