Stocks jumped again on Thursday after the Fed announced another round of stimulus for the U.S. economy. The timing of the announcement came right as the initial jobless claims showed another 6.6 million Americans filed for unemployment for the first time.
All four indices moved higher on the day, but the Russell really jumped with a 4.62% gain. The S&P moved up 1.45% and the Dow tacked on 1.22%. The Nasdaq was the lone index that failed to gain at least 1.o%, but it still gained 0.77%.
Nine of the 10 main sectors moved higher on Thursday.The lone sector to move lower was the energy sector with a loss of 0.91%.
The financial sector led the way on the day with a gain of 5.36%.
There were two other sectors that gained over 4%– the utilities sector moved up 4.72% and the materials sector jumped 4.3%.
My scans turned decidedly more negative on Thursday with 64 bearish signals and two bullish signals.
The barometer dropped sharply, falling from 0.4 on Wednesday to -24.9 on Thursday.
With the abundance of bearish signals to choose from, today’s trade idea is from the bearish list. Teradata (NYSE: TDC) was on the list and the company scores poorly in the fundamental ratings. The EPS rating is a 20 and the SMR rating is a C.
We see on the chart that the stock has been trending lower within a trend channel over the last eight months and the stock is at the upper rail currently. In the previous instances where the stock was at the upper rail and then saw the stochastic readings make a bearish cross, the stock has dropped. In fact, the stock has dropped around 20% over the course of the next month.
Buy to open the May 25-strike puts on TDC at $3.70 or better. These options expire on May 15. With the option premiums and volatility high, I suggest a target gain of 75% on this trade. This means the stock will need to drop to $18.50 or so. I suggest a stop at $23.50.
— Rick Pendergraft
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