The selling that started on Thursday carried over in to Friday and all four indices fell once again. The losses on Friday caused all four indices to suffer weekly losses as well.
As for Friday’s losses, the Russell took the worst hit with a drop of 1.52%. The Nasdaq fell 0.94% and the Dow lost 0.68%. The S&P took the smallest loss at 0.62%.
Nine of the 10 sectors lost ground on Friday with only the consumer discretionary sector finishing in the black with a gain of 0.18%.For the week, six sectors moved higher and four moved lower.
The tech sector fell 1.21% on Friday and the healthcare sector dropped 1.10%.
Those were the only two sectors that lost more than 1.0% on the day.
My scans remained negatively skewed on Friday with 30 bearish signals and only two bullish signals.
The barometer did climb a little once the figures were added in to the calculation. Friday’s reading was -47.6, up from -65.5 on Thursday.
Not surprisingly, with only two stocks on the bullish list, I didn’t find anything I liked there. That left me with only bearish trade ideas to choose from. The one that stood out to me the most was on PDC Energy (Nasdaq: PDCE). The company’s fundamental ratings are below average with an EPS rating of 29 and an SMR rating of a C.
Looking at the chart we see a trend line connecting the highs from January and June and now the stock is butting up against that trend line currently. The daily stochastic indicators are in overbought territory and made a bearish crossover on Friday. The last time we had such a development the stock dropped over 40% in three weeks.
Buy to open the September 17.50-strike puts on PDCE at $3.70 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 $11.00. The stock was down to $10 as recently as May, so it won’t have to break that low to hit our target. I recommend a stop at $16.75.
— Rick Pendergraft
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