Stocks came under some selling pressure on Monday and all four of the main indices fell as a result. The Nasdaq took the worst hit at -0.67% and it was followed closely by the Dow which fell 0.64%.
The S&P dropped 0.58% and the Russell took the smallest loss at 0.29%.
All 10 of the main sectors fell on the day, but the size of the losses varied greatly. The utilities sector took the smallest loss at 0.02%. The materials sector fell 0.31% and that was the second smallest loss.
The communication services sector suffered the biggest loss at 1.04% and the consumer discretionary sector finished with the second worst drop at 0.64%.
My scans remain locked in on the bearish side and last night showed 43 names on the bearish list and only seven on the bullish side.
The barometer did move up a little as the difference between the two lists was smaller than the previous few days.
The final reading was -45.2 after a reading of -52.8 on Friday.
After four straight bearish trade ideas I was looking for a bullish one, but with only seven stocks to choose from, it didn’t happen. Instead I have another bearish idea and this one is on Chewy Inc. (NYSE: CHWY). The online pet supply company appeared on the bearish list and its fundamentals are pretty bad. The EPS rating is a 19 and it doesn’t have an SMR rating because it has been losing money. You can’t calculate an ROE when the company is losing money.
I wrote an article about Chewy recently and I stated that I am a customer and love the convenience, but the stock has left a lot to be desired. If we connect the closing highs from June and September we get a downward sloped trend line. That trend line is just below $30 at this time and the stock is just below $29. The stock is also overbought based on the daily stochastic readings and they made a bearish crossover last night.
Buy to open the February 30-strike puts on CHWY at $2.90 or better. These options expire on February 21. In order for these options to double the stock will need to drop to $24.20. The stock seems to have some support in the $22 area, but it won’t have to get that low for these options to double. I suggest a target gain of 100% with a stop at $30.25.
— Rick Pendergraft