Stocks got hit with some significant selling on Friday as the coronavirus concerns continued to worry investors. All four domestic indices experienced decent declines as a result.
The Russell took the worst hit with a drop of 1.32%. The Nasdaq and the S&P were just shy of losing 1.0% with declines of 0.93% and 0.90% respectively. The Dow was able to keep its loss at only 0.58%.
Nine of the 10 sectors fell on Friday. The utilities sector was the lone group to gain ground on the day with a move of 0.26%.
The healthcare sector was the worst performer on the day, falling 1.67%.The consumer discretionary sector was the second worst performer with a loss of 1.39%.
There were four sectors that dropped over 1.0%.
My scans weren’t as negative as I expected them to be after Friday’s selloff, but they did turn in their eighth straight negative result.
The final count showed 37 names on the bearish list and 24 names on the bullish side.
The barometer actually moved up on Friday as the weighting dropped for the big negative readings from last Tuesday and Wednesday. The indicator moved to -27.1 from -38.2 on the day.
Believe it or not, even though there were a great number of stocks to look at from Friday night’s scans, there weren’t very many that got my attention. In the end I decided on a bearish trade idea for today and the subject company is Exelon (NYSE: EXC). The stock appeared on the bearish list and its fundamental readings aren’t very good. The company scores a 56 on the EPS rating scale and it gets a D on the SMR grading system.
Exelon has rallied rather sharply over the last month, but that has put it in overbought territory. We saw a similar rally in the August/September time frame, but then the stock dropped sharply. We also saw a pretty significant drop back in the June/July timeframe. We could be looking at a cyclical pattern at play. The stock is tremendous overbought based on both the 10-day RSI and the daily stochastic indicators.
Buy to open the March 48-strike puts on EXC at $1.50 or better. These options expire on March 20. In order for these options to double the stock will need to drop to $45.00. The stock dropped below $44 in three different instances in the past year. I suggest a target gain of 100% with a stop at $48.25.
— Rick Pendergraft
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