The indices were split on Tuesday with two moving higher and two moving lower. What was really interesting was that there was very little moving back and forth across the break even point—the two that moved higher were in positive territory almost all day and the two that moved lower were in negative territory almost all day.
The Nasdaq led the way with a gain of 0.73% and it was joined on the plus side by the S&P with a move of +0.23%. The Russell dropped 0.99% as the worst performer and the Dow joined it in negative territory with a loss of 0.24%.
Looking at the sectors, four moved higher and six moved lower.The communication services sector gained 0.90% to lead the way and it was followed by the consumer discretionary sector with a gain of 0.62%.
The energy sector fell 1.26% as the worst performer on the day and the financial sector declined 0.65% for the second worst performance.
My scans were slightly more negative last night than they were the night before.
There were 32 bearish signals and seven bullish signals for net reading of -25.
The barometer dropped once these results were added to the calculation, falling to -13.5 from -9.6.
After a couple of bullish trade ideas in a row, and given the greater number of signals, today’s trade idea is a bearish one. Six Flags Entertainment (NYSE: SIX) appeared on the bearish list and the company only gets an 11 on its EPS rating scale. The company doesn’t have an SMR rating because it has been losing money over the last three quarters and you can’t calculate a return on equity if the company is losing money.
The daily chart shows how the stock has been trending lower and it reflects the fact that the company was losing money before the pandemic and now the company’s parks are closed, or at least they were. The trend line that connects the highs from February and June is now acting as resistance. We also see that the daily stochastic indicators are in overbought territory and made a bearish crossover.
Buy to open the September 22.50-strike puts on SIX at $3.30 or better. These options expire on September 18. I suggest a target gain of 75% and that means the stock needs to drop to $16.72. The stock was down near $16 at the beginning of the month. I recommend a stop at $21.50.
— Rick Pendergraft
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