For the first time this week, all four indices moved in the same direction on Thursday. Unfortunately that direction was to the downside. The Nasdaq dropped the least of the four, but it still lost 0.65%
The other three indices all lost at least 1.0%. The Russell took the worst hit with a loss of 1.64% and it was followed by the Dow which dropped 1.08%. The S&P declined 1.0%.
All of the sectors moved down yesterday as well and that’s the first time that has happened this week. The consumer staples sector declined the least at -0.27%. The healthcare sector dropped 0.37% and that was the second best performance.
After soaring for the first few days of the week, the energy sector has come back down the last two days. It was the worst performer yesterday with a drop of 3.23% and it was followed by the materials sector which fell 2.11%.
My scans continue to produce a large number of bearish signals, but last night there were also a fare number of bullish signals. There were 70 bearish signals and 23 bullish signals.
The barometer moved up a little as the big negative reading from Tuesday continues to lose weighting. The final reading for Thursday was -55.1, up from -58.5 on Wednesday.
With some bullish signals to choose from I really wanted to avoid making a fourth straight bearish trade idea. Unfortunately the stocks that had charts that I liked didn’t have very good fundamental ratings. So today’s trade idea is another bearish one and this time it’s on BP PLC (NYSE: BP). The company’s fundamental ratings are poor with an EPS rating of 7 and an SMR rating of a D.
Looking at the chart we see how BP has trended lower over the last six months with a trend channel forming. The stock moved above the upper rail with the crazy jump on Monday and Tuesday, but it dropped back down below the rail yesterday. The RSI and the stochastic indicators have both reversed lower after being in overbought territory.
Buy to open the December 20-strike puts on BP at $2.07 or better. These options expire on December 18, 2020. I suggest a target gain of 100% for this trade and that means the stock will need to drop to $15.86. The stock was down below $14.50 at the end of October, so the stock won’t have to break that low to hit our target. I recommend a stop at $20.00.
— Rick Pendergraft
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