The indices finished mixed on Wednesday after opened significantly higher. The Nasdaq managed to hang on for a 0.14% gain and the S&P logged a gain of 0.03% after being up considerably higher in the morning session.
The Russell opened higher as well, but the index trended lower throughout the day and finished with a loss of 0.09%. The Dow dropped 0.03% to join the Russell in the red. It was also in positive territory out of the gate.
The sectors were split down the middle on the day with five moving higher and five moving lower.They were led by the tech sector which tacked on 0.36%.
The second best performance came from the utilities sector and it inched up 0.31%.
The worst performing sector was the energy sector which fell 1.02%.
The industrial sector dropped 0.54% as the second worst performer.
My scans turned even more negative last night with 85 names on the bearish list and eight names on the bullish list.
The barometer dropped to -54 from -35.2 once these results were added in to the equation. That is the lowest reading in almost a month.
Despite the huge discrepancy in the list sizes, there were just as many stocks on the bullish list that got my attention as there were on the bearish list. In the end the one that won out was Olin Corp. (NYSE: OLN). The stock appeared on the bearish list and the company’s fundamental ratings are below average. The EPS rating is a 44 and the SMR rating is a D.
The daily chart shows how the stock has been trending lower over the last year. There is a trend line that connects the highs from the last eight months. The stock just hit the trend line in the last few days and has turned lower since hitting it. The stochastic readings hit overbought territory and made a sharp u-turn after yesterday’s drop. The company is expected to report earnings on February 4. There is a history of the stock trending lower ahead of the earnings report and it has also been known to fall after earnings reports.
Buy to open the March 18-strike puts on OLN at $1.60 or better. These options expire on March 20. In order for these options to double the stock will need to drop to $14.80. That price level is slightly below the low in August, but I think the stock could drop below that level after earnings. I suggest a target gain of 100% with a stop at $18.20. Should the stock drop to the point that you can take gains of 50% or greater ahead of the report, I suggest taking profits on half of the position.
— Rick Pendergraft
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