Volatility has returned to the market and we saw selling pressure on Tuesday. I am also writing this at a point where we know Iran has fired missiles at U.S. bases in Iraq and futures are pointing to a lower open on Wednesday.
As for Tuesday’s results, all four indices finished in the red with the Dow suffering the worst loss at 0.42%. The Russell fell 0.30% and the S&P dropped 0.28%. The Nasdaq was in positive territory for most of the day, but fell in the closing minutes to finish with a loss of 0.03%.
Nine of the 10 sectors fell on Tuesday with the communication services sector inching up 0.13% as the only sector to finish in the black.The consumer staples sector took the biggest loss at 0.77% and the financial sector dropped 0.65% as the second worst performer.
My scans showed an increase on both sides of the equation on the day, but there was a much bigger jump from the bearish side.
There were a total of 45 names on the bearish list and 11 on the bullish list.
The barometer turned lower once these numbers were added in to the equation, falling to -16.7 from -6.1.
With the abundance of bearish signals to choose from, today’s trade idea is a bearish one on TechnipFMC (NYSE: FTI). The stock appeared on the bearish list and its fundamental ratings are poor with an EPS rating of 30 and an SMR rating of a D.
The chart shows how the stock has been moving lower over the last six months with a trend channel defining the different cycles within the overall downward trend. The stock hit the upper rail of the channel on Monday and then turned lower yesterday. We also see the stock was overbought based on both the RSI and the stochastics. The last time we saw that happen was back at the July peak.
Buy to open the February 22-strike puts on FTI at $1.40 or better. These options expire on February 21. In order for these options to double the stock will need to drop to $19.20. The stock was below the $19 level at the December low, so the stock won’t have to break that potential support to hit our target. I suggest a target gain of 100% with a stop at $22.00.
— Rick Pendergraft
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