Investors appeared to get spooked by a couple of pieces of information on Monday. The U.S. hit new highs on COVID-19 cases for consecutive days over the weekend and the odds of getting a stimulus deal appear to be getting worse. That information and prognosis seemed to weigh heavily on investors and stocks were sent reeling.
All four indices fell sharply on the day, but they did bounce off their lows. All four were down over 2.5% at their lows, but none of them finished with losses that large. The Dow took the worst hit at 2.29% and the Russell fell 2.15%. The S&P dropped 1.86% and the Nasdaq took the smallest hit, but still lost 1.64%.
All 10 sectors lost ground, but just barely. The utilities sector only lost 0.03% and was the best performer on the day. All the other sectors lost over 1.0% and six of them lost over 2.0%.
It is starting to sound like a broken record, but the energy sector continues to lead or lag almost every day. In the case of Monday it was the worst performer with a drop of 3.59%. The materials sector and the industrial sector tied for the second worst performance with each losing 2.5%.
My scans flipped to a negative skew after the big selloff with 41 bearish signals and 17 bullish signals on Monday.
The barometer dropped from 20.0 to 4.4 once these results were added in to the equation.
After two straight bullish trade ideas and an abundance of bearish signals over bullish ones, I have a bearish trade idea for you today. Levi Strauss (NYSE: LEVI) appeared on the bearish list and its fundamentals aren’t that great. The EPS rating is 22 and the SMR rating is a C.
The $17 level jumped off the chart as resistance for Levi Strauss. The high in June jumps out immediately, but if you go back to March when the stock gapped lower, the stock had trouble at $17 then as well. Now we have a third instance where the stock has hit that area turned lower. We also see that the RSI and stochastics were in overbought territory and have now turned lower. We saw similar actions in June.
Buy to open the December 18-strike puts on LEVI at $2.35 or better. These options expire on December 18, 2020. I suggest a target gain of 100% and that means the stock will need to drop to $13.30. The $12 area has served as strong support, but the stock won’t have to reach that low to hit our target. I suggest a stop at $17.25.
— Rick Pendergraft
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