Trade talks buoyed stocks once again on Monday and that led to all four indices moving higher. The Nasdaq was the top performer with a gain of 0.56% and it was followed closely by the Russell with a gain of 0.55%. The Dow tacked on 0.42% and the S&P moved up 0.37%.
There were seven sectors that moved up on Monday, but the energy sector was hands down the top performer with a jump of 3.31%. The industrial sector was the only other sector to gain over 1% with a move of 1.17%.
[hana-code-insert name=’adsense-article’ /]The utilities sector took the worst hit again and this time it fell 1.28%.The consumer staples sector fell 0.98% and the healthcare sector fell 0.33%.
My scans returned to their negative ways on Monday with 26 names on the bearish list and 10 on the bullish side.
The barometer inched up a little in spite of the negative results from the scans.
The final reading was -17.6, up from -22.3.
Today’s trade idea comes from the bearish list and the subject company is Ctrip.com International (Nasdaq: CTRP). The company’s fundamental ratings aren’t horrible, but the chart was the main driver behind this trade idea. The company has an EPS rating of 76 and an SMR rating of a B.
What we see on the daily chart is that the highs from April and July connect to form a downward sloped trend line and the stock is right at the trend line now. We also see that a lower rail has formed over the last few months. The stock is the most overbought it has been since back in April based on the stochastics and the RSI is the highest it has been since March. The stochastic readings did make a bearish crossover last night.
Buy to open the December 36-strike puts on CTRP at $2.60 or better. These options expire on December 20. In order for these options to double the stock will need to drop to $30.80. In the first two instances where the stock hit the upper rail (forming the channel) it fell over 20% in the next month and a half. We only need a drop of 12.6% for our target to be hit. I suggest a target gain of 100% with a stop at $36.00.
— Rick Pendergraft
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