Stocks gained ground again on Monday and for the S&P that made three straight days of gains and eight of the last nine. All four of the indices moved higher, but this time it was the Dow that led the way with a gain of 0.34%. Boeing helped give the index a boost on Monday after dragging it down on Friday.
The Nasdaq tacked on 0.23% and the Russell moved up 0.13%. The S&P lagged the other three indices, but still managed a gain of 0.09%.
[hana-code-insert name=’adsense-article’ /]The sectors were evenly split on Monday with five moving higher and five moving lower.On the plus side, the energy sector jumped 1.03% as the top performer and the industrial sector tacked on 0.82%.
The utilities sector was the worst performer with a decline of 0.93%.
The consumer staples sector lost 0.43% and that was the second worst performance.
My scans made it seven straight days with negatively skewed results.
There were 60 names on the bearish list and four on the bullish list for Monday.
The barometer fell from -31.7 to -41.7 as the results have continued to get more bearish in nature.
Over the past week there has been a pattern to the trade ideas —bearish trade idea, bullish trade idea, bearish trade idea, bullish trade idea. That means today’s trade idea must be a bearish one. I didn’t really make the decision based on keeping the pattern alive, it was just that there weren’t any setups from the bullish list that I liked. What I did see that I liked was a bearish chart pattern on the Utilities Select Sector SPDR (NYSE: XLU).
The pattern that jumped out at me is called a bearish engulfing pattern. The XLU opened higher than the close on Friday and then reversed to close below the low on Friday. This pattern suggests that the fund is set to shift from an upward trend to a downward trend.
Buy to open the February 65-strike puts on XLU at $1.65 or better. These options expire on February 21. In order for these options to double the fund will need to drop to $61.70. The fund won’t have to break the recent low for these options to double. I suggest a target gain of 100% with a stop at $64.95.
— Rick Pendergraft
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