Wednesday was a reversal day for the three main indices. They were all three trading in positive territory until the afternoon when the Fed minutes were released. Within those minutes it was revealed that the Fed had no intentions of capping treasury yields at this time and that seemed to spook investors a little.
The Nasdaq was the worst performer on the day and finished with a loss of 0.57%. The S&P dropped 0.44% and the Dow declined 0.31%. The Russell managed to stay in positive territory with a gain of 0.03%, but it was considerably higher before the Fed release.
Nine of the 10 sectors fell on the day with the financial sector being the lone gainer with a move of 0.03%.The energy sector was the worst performer for a second straight day, this time with a drop of 1.17%.
The consumer staples sector was the second worst performer with a loss of 0.73%.
My scans produced another negative result last night with 39 bearish signals and eight bullish signals.
The barometer dropped a little more once these results were added in, falling to -21.4 from -13.5.
None of the bullish signals stood out as there were so few to choose from.
The one stock on the bearish that stood out the most was Kratos Defense & Security Solutions (Nasdaq: KTOS). The company scores a 24 on the EPS rating scale and it gets a C on the SMR grading system.
We see on the chart how the stock has had trouble breaking back above the $20 level since reaching it in early June. The stock has made several attempts to move above and it has on a few occasions, but it has yet to close above that mark since February. We also see how the RSI and stochastic indicators were reaching overbought territory and have now turned lower.
Buy to open the November 20-strike puts on KTOS at $2.85 or better. These options expire on November 20. I suggest a target gain of 75% for this trade and that means the stock will need to drop to $15.00. The stock dropped below this area in early July, so it won’t have to break that potential support to hit our target. I recommend a stop at $20.75.
— Rick Pendergraft
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