After recording their first back to back weekly gains since February, stocks got off to a rough start this week as oil prices plunged yet again. Because there isn’t enough storage space for physical crude, the price of the April contracts (with May delivery) actually plunged to -$37.63 at the close. The front month contracts roll to the May contracts tomorrow.

All four of the main indices fell on Monday with the Dow taking the worst loss at -2.44%. The S&P dropped 1.79% as the second worst performer. The Russell fell 1.28% and the Nasdaq declined 1.03% and these two actually managed to trade in positive territory for part of the day.

All of the main sectors fell on Monday with two of them dropping more than 3.0%.

The utilities sector fell 3.8% and the energy sector declined 3.12% as the two worst performers.

The healthcare sector lost 0.79% and that was the smallest loss on the day.

The communication services sector was the only other one that didn’t drop at least 1.0% with a loss of 0.91%.

My scans remained bearishly skewed, but the readings for the last few days have been much smaller than they were in the previous three days. There were 37 bearish signals and seven bullish signals on Monday.

The barometer moved up to -46.8 after a reading of -78.3 on Friday.

There were actually two different stocks on the bullish list that were intriguing possibilities for today’s trade idea, but both were reporting earnings before the open this morning and it would have been impossible to price the options. That left me with nothing but bearish alternatives for today. Nuance Communications (Nasdaq: NUAN) appeared on the bearish list and it has an EPS rating of 42 and an SMR rating of a C.

The stock has rallied with the rest of the market over the past month, but is now facing resistance at its 50-day moving average. The stock hit the trend line yesterday but it wasn’t able to break above it. The stochastic indicators are in overbought territory and made a bearish crossover yesterday.

Buy to open the June 21-strike puts on NUAN at $2.80 or better. These options expire on June 19. I suggest a target gain of 100% for this trade idea and that means the stock will need to drop to $15.40. The stock was below $14 in March, so it won’t have to break that low to hit our target. I suggest a stop at $20.20.

— Rick Pendergraft

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