Friday saw more selling in the market and as of Sunday evening S&P futures were locked limit down. The selloff from the coronavirus doesn’t seem anywhere close to being over for the overall market, at least not in the U.S. Foreign markets have been holding up a little better, especially in parts of Asia and parts of Europe.

As for the domestic indices, the results from Friday showed significant losses for all four indices after all four were in positive territory at midday. The Dow took the worst loss at 4.55% and it was followed by the S&P with a drop of 4.34%.

The Russell declined 4.24% and the Nasdaq took the smallest loss at 3.79%.

Nine of the 10 main sectors fell on Friday with the energy sector gaining 0.98% as the only one in positive territory.

Friday’s gain was little of little consolation as the energy sector fell almost 20% for the week.

The utilities sector got hit the hardest on Friday with a loss of 7.93%.

Consumer staples fell 6.48% as the second worst performer and the industrial sector dropped 5.01%.

With the selling that hit on Friday, the number of stocks on the bullish list dropped sharply, falling from 60 to eight. There were only two stocks on the bearish list.

The barometer fell from 64.8 to 38 once these results were added in to the equation.

Even though there were only two stocks on the bearish list, there was one that I liked for a trade setup. Rite Aid (NYSE: RAD) was on the bearish list and the company scores an E on the SMR rating system. The company does get a 75 on the EPS rating system, but I have found more correlation between the SMR reading and my scans.

The biggest takeaway from the chart is that the stochastic readings made a bearish crossover on Friday. Each of the last four instances where this has happened has resulted in sizable declines in the stock price. In this case, we need the stock to drop approximately 29%.

Buy to open the April 18-strike puts on RAD at $3.70 or better. These options expire on April 17. With the volatile market and the high option premiums, I suggest a target gain of 50%. In order to hit our target the stock will need to drop below $12.45. I also suggest a stop at $19.25.

— Rick Pendergraft

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