Friday’s selling carried over in to Monday after some disappointing economic news out of China and here in the U.S. President Trump didn’t help matters with an early morning tweet about new tariffs on steel from Argentina and Brazil.
All four indices saw significant losses with the Nasdaq (-1.12%) and Russell (-1.04%) both dropping over 1.0%. The Dow fell 0.96% and the S&P dropped 0.86%.
[hana-code-insert name=’adsense-article’ /]Eight of the 10 sectors fell while one finished higher and one finished unchanged.The consumer staples sector gained 0.23% on the day while the energy sector was unchanged.
As for the downside, the industrial sector took the worst hit at -1.66% and it was followed by the tech sector with a decline of 1.43%.
The materials sector dropped an even 1.0% to make it three sectors with losses of 1.0% or higher.
My scans continued to get more negative on Monday with 105 names on the bearish list and only four names on the bullish side.
The barometer dropped sharply once these results were included in the calculation, falling from -20.5 to -59.9. That is the lowest reading since September 13.
Given the huge discrepancy between the lists, it was much easier to find a bearish trade idea. Uber Technologies (NYSE: UBER) stood out the most to me and the company’s fundamental ratings are mixed. The EPS rating is a paltry 7 and the SMR rating is a B.
The daily chart shows how the stock has trended lower since July. The stock made its debut in May and moved slightly higher out of the gate, but started its downward trend not too long after. The highs from July and October connect to form a trend line and the stock just hit it. We also see that the 50-day moving average is in the same area and that provides a second layer of resistance.
Buy to open the January 30-strike puts on UBER at $2.25 or better. These options expire on January 17. In order for these options to double the stock will need to drop to $25.50. The lows in November were just above this level, but I think it can break to a new low given the trend. I suggest a target gain of 100% with a stop at $30.10.
— Rick Pendergraft
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