Stocks came under some selling pressure on Thursday and three of the four indices finished in the red. The S&P was one of those that lost ground and that brought its four-day winning streak to an end.
The Nasdaq finished with the worst loss at 0.69% and the S&P ended up losing 0.34%. The Russell lost 0.03 points—not percentage points, but actual points. The Dow managed to rally in the closing minutes and finished with a gain of 0.05%.
The sectors were split on the day with six moving lower and four moving higher.The utilities sector dropped 1.79% and that was by far the worst performance of the bunch.
The tech sector fell 0.82% as the second worst performer.
On the positive side, the financial sector jumped 2.18% and the industrial sector gained 1.06%.
Those were the top two performers on the day.
My scans turned more negative thanks to the losses in stocks. There were 105 bearish signals and only two bullish signals.
The barometer moved lower after these results were added in to the equation, falling from -46.7 to -62.6.
The stocks on the bullish list last night had terrible fundamental ratings so there weren’t any options on the bullish side. There were a number of stocks on the bearish list where I liked the setup, but I felt the best one was another utility company. Nisource, Inc. (NYSE: NI) was on the bearish list and it has an EPS rating that’s above average at 75, but the SMR rating is only a C.
What really got my attention about the stock was the daily chart and the downward sloped trend line that connects the highs from March and April. The stock hit that trend line on Wednesday and then turned lower yesterday. We also see that both the 10-day RSI and stochastics were in overbought territory and turned lower yesterday. The stochastic indicators made a bearish crossover in the process.
Buy to open the July 26-strike puts on NI at $2.00 or better. These options expire on July 17. I suggest a target gain of 100% which means the stock will need to drop to $22. The stock was below that level in just a few weeks ago so it won’t have to break to a new low. I suggest a stop at $25.75.
— Rick Pendergraft
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