Things were moving along pretty well on Tuesday with all four main indices in positive territory in mid-afternoon after two of the four had been in negative territory in the morning. Then around 2:30 ET, President Trump announced that he instructed his administration to halt stimulus negotiations until after the election.
Stocks tumbled after the announcement and all four indices moved in to negative territory. The Nasdaq had struggled to get in to positive territory and after the announcement it fell sharply, finishing with a loss of 1.57%.
The S&P dropped 1.40% and the Dow fell 1.34%. The Russell had been up over 2.2% at its peak, but it dropped in to negative territory and finished with a loss of 0.30%.Nine of the 10 sectors were in positive territory prior to President Trump’s announcement, but at the end of the day, nine of the 10 would finish with losses. The utilities sector was the only one to finish in the black with a gain of 0.81%.
The communication services sector was the only that never made it in to positive territory during the day and it finished with the worst loss—a drop of 2.10%. There were another seven sectors that dropped at least 1.0%. The consumer discretionary sector was the second worst performer with a drop of 1.85%.
My scans flipped back to a negative reading last night and it was a pretty sharp shift. There were 68 names on the bearish list with only six bullish signals.
The barometer dropped from -15.0 to -33.0 once these results were added in to the equation.
With so many signals to choose from on the bearish list, today’s trade idea is a bearish one. The company is Slack Technologies (NYSE: WORK) and it has poor fundamental ratings. The EPS rating is 24 and the SMR rating is a D.
The fundamentals are weak and the stock has been trending lower over the last four months with a series of lower highs. What really got my attention was how the stochastic indicators made a bearish crossover from overbought territory. We see the three previous instances where the indicators did these were really good signals for a downward move. I expect the same thing this time around.
Buy to open the November 30-strike puts on WORK at $3.15 or better. These options expire on November 20. I suggest a target gain of 100% for this trade and that means the stock will need to drop to $23.70. That target is below the September low, but if we look at the last three peaks, the lows have been steadily lower. I suggest a stop at $30.00.
— Rick Pendergraft
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