Monday was an interesting day as three of the four indices opened in negative territory only to have them all rally throughout the day. Three of the four would finish in the black. The Nasdaq opened higher and remained in positive territory all day, finishing with a gain of 2.51%.
The S&P finished up 0.84% on the day and the Dow eked out a gain of 0.03%. The Russell was the only one that finished in the red with a loss of 0.36%.
The results from the sectors were incredibly odd as only three sectors moved higher on the day. The tech sector jumped 2.52% to lead the way. The consumer discretionary sector gained 1.60% and the communication services sector moved up 1.20%.
On the downside, there were four sectors that dropped over 1.0%. The energy sector took the worst hit with a loss of 1.66%.The utilities sector dropped 1.31%, the industrial sector fell 1.22%, and the consumer staples sector declined 1.04%.
My scans turned sharply lower last night with 140 bearish signals and only 11 on the bullish side.
The barometer dropped sharply when these results were added in to the calculation, falling from -14.3 to -64.3.
There were a number of stocks to choose from on the bearish list and there were even a few on the bullish side that caught my eye. Ultimately I felt a bearish trade on Marathon Petroleum (NYSE: MPC) gave us the greatest odds of success. The company’s fundamental scores are below average with an EPS rating of 22 and an SMR rating of a C.
The daily chart shows how the stock has been trending lower over the past month or so and a trend channel has formed. The stock just hit the upper rail last Friday and has now turned lower. The daily stochastic indicators made a bearish crossover last night and a similar move in early June proved to be a solid bearish signal.
Buy to open the September 40-strike puts on MPC at $5.80 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 $29.85. The lower rail is currently just below $31, but it will fall below $30 in the next few weeks. I recommend a stop at $39.80.
— Rick Pendergraft
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