Stocks made it three straight days of losses on Tuesday as all four indices fell once again. If there is a reason for encouragement it is the fact that they all closed well off their lows.
The Dow suffered the biggest loss at 1.01% and it was followed by the S&P with a decline of 0.66%. The Nasdaq dropped 0.55% and the Russell took the smallest loss at 0.31%. At the lows of the day, all four were down well over 1.0%.
[hana-code-insert name=’adsense-article’ /]Nine of the 10 sectors moved lower on the day with only the utilities sector (+0.29%) managing to gain ground.The energy sector dropped 1.63% as the worst performer and it was followed by the financial sector which fell 1.34%.
In all there were four sectors that dropped by 1.o% or more.
My scans produced yet another negative result on Tuesday night, but the difference wasn’t nearly as bad as it was on Friday and Monday.
There were 28 names on the bearish list and nine names on the bullish list.
The barometer rose a little with the discrepancy between the lists being smaller. The final reading last night was -51.4, up from -59.9.
Looking through the charts, there was only one stock on the bullish list that got my attention, but its fundamentals weren’t very good. As a result I have another bearish trade idea for you today. Colgate Palmolive (NYSE: CL) appeared on the bearish list and its fundamentals were only average with an EPS of 49 and it doesn’t have an SMR rating at this time. The reason is that the company isn’t showing a calculable ROE at this time. Regardless, the other measurements are pretty weak and well below average for the most part.
The chart shows how the stock has been trending lower over the last three months and how a trend channel has formed to define the various cycles within the overall trend. The stock just hit the upper rail of the channel and it was overbought based on the stochastic readings. The stochastics made a bearish crossover last night and the last few times they have done that, the stock has fallen rather sharply.
Buy to open the January 67.50-strike puts on CL at $1.70 or better. These options expire on January 17. In order for these options to double the stock will need to drop to $64.60. The stock was below the $65 level at its low in early November and I look for it to get there again in the next month and a half. I suggest a target gain of 100% with a stop at $68.00.
— Rick Pendergraft
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