Stocks came under pressure on Tuesday after the scare of the Coronavirus spread around the globe. Overseas markets were hit overnight and the fear spread as the first case was confirmed domestically.
All four of the major indices lost ground on the day, but it was the Russell that got hit the worst with a loss of 1.14%. The Dow dropped 0.52% as the second worst performer. The S&P fell 0.27% and the Nasdaq declined the least at 0.19%.
Seven of the 10 sectors fell on Tuesday with the energy sector falling 1.79% as the worst performer.The industrial sector declined 1.10% and the materials sector dropped 1.08% to give us three sectors with losses greater than 1.0%.
As far as the three sectors that gained ground, they were the defensive sectors.
The utilities sector led the way with a gain of 0.91%.
The consumer staples sector moved up 0.34% and the healthcare sector inched up 0.11%.
My scans stretched their negative streak to five days on Tuesday. There were 54 names on the bearish list and only one on the bullish list.
The barometer fell to -35.2 from -24.2 once these results were added in to the equation.
With only one stock on the bullish list, if you guessed that today’s trade idea is a bearish one, you would be right. The stock that is the subject is Invitae (NYSE: NVTA). The biotech firm scores a 10 on the EPS rating system and a D on the SMR scale.
We see that the stock dropped from August through early November before bouncing a little. That rally stopped just shy of the $21 level and that is where the stock peaked last week. The daily stochastic readings and the 10-day RSI were in overbought territory, but the RSI dropped below that threshold yesterday. The stochastic readings made a bearish crossover like it did before the big decline in early December.
Buy to open the March 20-strike puts on NVTA at $2.80 or better. These options expire on March 20. In order for these options to double the stock will need to drop to $14.40. The stock bottomed at $14.35 in November, so we will need it to challenge that low again in order to hit our target. I suggest a target gain of 100% with a stop at $20.05.
— Rick Pendergraft
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