The indices struggled again on Wednesday as the hopes for another stimulus package before the election continue to fade. Investors seem to be focused on the ongoing negotiations as a key driver in the market movements.
All four indices lost ground after opening higher. The Russell fell 0.86% as the worst performer and the Dow dropped 0.35% as the second worst. The Nasdaq lost 0.28% and the S&P took the smallest loss at 0.22%.
Eight of the 10 sectors fell on Wednesday with only communication services (+1.68%) and consumer staples (+0.09%) moving higher.
The energy sector flipped the script again and after being the top performer on Tuesday, it was the worst performer yesterday. The sector fell 1.91%. The industrial sector fell 1.01% and was the only other sector that lost more than 1.0%.
My scans were pretty balanced on the day with 13 bullish signals and 15 bearish signals.
The barometer inched ever closer to the zero level with a final reading of -5.1. The reading for Tuesday night was -10.8.
With the balanced scan results and the barometer approaching neutral, I felt a bearish trade idea was a better bet to keep balance. Alaska Air Group (NYSE: ALK) appeared on the bearish list and the company has been struggling as the travel industry has been hit hard during the pandemic. The company has an EPS rating of 7 and the SMR rating is a C.
The chart shows how the highs from June and September connect to form a downward sloped trend line and the stock just hit that line. The stochastic indicators are in overbought territory and made a bearish crossover last night. The last few instances where these indicators were overbought and made the bearish crossover, the stock dropped in the days that followed.
Buy to open the December 42.50-strike puts on ALK at $5.40 or better. These options expire on December 18, 2020. I suggest a target gain of 75% and that means the stock needs to fall down to $33.00. The stock was down in that same range in early August and in late June. I recommend a stop at $41.00.
— Rick Pendergraft
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