Stocks were mixed again on Friday with three of the four indices moving higher and one moving lower. All four were in the red at some point in the morning, but only the Dow finished in the red with a loss of 0.23%.
The Russell led the way with a gain of 0.39%. The Nasdaq and S&P posted identical gains of 0.28% to round out the gains.
The sectors were mixed as well with six moving higher and four moving lower.The utilities sector led the way with a gain of 2.26% and that is the second straight day the sector was the top performer.
The healthcare sector jumped 1.37% and that was the second best performance.
On the downside, the energy sector fell 1.40% as the worst performer and it was followed by the financial sector with a loss of 0.83%.
My scans flipped to a negative result on Friday with 50 bearish signals and seven bullish signals.
The barometer moved down to -14.3 and that ended three straight days of positive readings from the indicator.
Despite the huge difference between the two lists, there were four stocks on each side that got my attention. Ultimately I felt the setup that gave us the greatest chance of success was a bearish trade on PPG Industries (NYSE: PPG). The stock appeared on the bearish list and the fundamental ratings are average. The EPS is rating is only 41 and the SMR rating is a C.
There were a couple of things that stood out to me on the chart. First, the stock stalled in the $116-$116.50 range back in early June and it stalled there again on Wednesday and Thursday. The stock gapped above that level on Friday, but it couldn’t hold the gain and we saw a huge bearish engulfing pattern form. We also see that the daily stochastic indicators are in overbought territory and made a bearish crossover. The 10-day RSI was also in overbought territory and fell below the 70 level.
Buy to open the September 115-strike puts on PPG at $9.00 or better. These options expire on September 18. I suggest a target gain of 75% and that means the stock will need to drop to $99.25. The low in June was just below $98.50, so the stock won’t have to break that low to hit our target. I recommend a stop at $117.00.
— Rick Pendergraft