The three-day winning streak came to an end on Monday as stocks saw some mild selling pressure. All four of the main indices fell on the day. The losses were relatively minor, but they did steepen heading in to the close.
The Nasdaq took the biggest loss at 0.40% and it was followed by the Dow with a decline of 0.38%. The S&P dropped 0.32% and the Russell fell 0.15%.
[hana-code-insert name=’adsense-article’ /]Eight of the 10 sectors dropped on Monday with the worst loss coming from the healthcare sector at 0.70%.The tech sector finished with the second worst drop at 0.52%.
The consumer discretionary sector was the top performer with a gain of 0.12%.
The consumer staples sector was the only other sector to move up with a gain of 0.08%.
My scans turned negative with the small losses from the indices.
There were 15 names on the bearish list and nine on the bullish side.
The barometer fell from 32.9 to 21.5 once these results were added in to the equation.
None of the stocks on the bullish list or bearish list looked like great setups to me, so I had to look elsewhere for today’s trade idea. Looking at the various sector ETFs, the Energy Select Sector SPDR (NYSE: XLE) jumped out at me due to the pattern on its chart. There was also a bearish signal generated by the Tickeron Trend Prediction Engine on Friday and 83% of previous signals have been successful.
The daily chart shows how the ETF has been trending lower over the last six months with a trend channel forming. The fund is near the top rail of the channel at this time and I look for the upper rail to act as resistance.
Buy to open the January 61-strike puts on XLE at $2.80 or better. These options expire on January 17. In order for these options to double the fund will need to drop to $55.40. The fund was down at the $55 level back in August, so it won’t need to break to a new low for these options to double. I suggest a target gain of 100% with a stop at $60.50.
— Rick Pendergraft
[hana-code-insert name=’oxford 2′ /]