Tuesday saw stocks move lower for the most part, three of the four indices dropped on the day with only one advancing. The Russell gained 0.33% as the lone index to move higher. The Nasdaq fell 0.59% and that was the worst performance by far. The S&P lost 0.08% and the Dow declined 0.07%.
Even though the majority of the indices were down, the majority of the sectors moved higher. There were six sectors that logged gains, one that was unchanged, and three that lost ground.
[hana-code-insert name=’adsense-article’ /]The healthcare sector led the way with a gain of 1.4%.The second best performance came from the materials sector at 0.62%.
The tech sector and communication services sector tied for the worst performance with identical losses of 0.91%.
Alphabet missed its earnings estimate and that caused the stock to drop over 2%.
The stock is a major holding in the communication services sector ETF.
My scans reached 11 straight days of negatively skewed results with 31 names on the bearish list and five on the bullish list.
The barometer rose slightly after these results were added in to the equation, climbing from -32.3 to -30.6.
With the greater number of stocks to choose from on the bearish list, today’s trade idea is another bearish one. Today the subject company is iQIYI (Nasdaq: IQ). The company’s fundamental ratings are rather weak with an EPS rating of 22 and an SMR rating of a D.
The daily chart shows how the stock has been trending lower over the last eight months with a trend channel forming over the last six months. The stock got up close to the lower rail, but didn’t actually hit it. With the daily stochastic readings in overbought territory and making a bearish crossover, I don’t think it is going to get to the upper rail this time around.
Buy to open the December 17.50-strike puts on IQ at $1.50 or better. These options expire on December 20. In order for these options to double the stock will need to drop to $14.50. That price is below the low in early October, but the lower rail will be below this level in a week or two. I suggest a target gain of 100% with a stop at $18.00.
— Rick Pendergraft
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