Stocks finished the week on a sour note with all four indices falling on Friday. The Nasdaq was in positive territory for a brief period at the open, but the other three opened and remained in negative territory throughout the day.
The Russell took the biggest hit with a loss of 1.49% and it was followed by the Nasdaq which fell 0.87%. The S&P dropped 0.72% and the Dow declined 0.57%. The S&P and the Dow both lost ground on Thursday as well.
Seven of the 10 sectors wound up in negative territory on Friday with the energy sector experiencing the worst loss at 3.89%. The financial sector fell 1.65% and the materials sector dropped 1.43%.
The utilities sector was the leading gainer with a move of 0.98% while the communication services sector gained 0.38%. The healthcare sector was the third sector in the black on Friday with a gain of 0.31%.
My scans turned considerably more negative on Friday with 109 bearish signals and 15 bullish signals.
The barometer dropped to -63.6 from -51.5 once these results were added in to the calculations.
There were a number of stocks to choose from, I even found a few on the bullish list that were intriguing, but in the end I decided a bearish trade idea gave us the greatest odds of success. The company is Cabot Oil & Gas (NYSE: COG) and its fundamental ratings are average. The EPS rating is a 53 and the SMR rating is a B.
This trade is driven more by the technical analysis than the fundamentals. We see the trend channel that has formed over the last six months and how the stock hit the upper rail last week. I made another bearish trade idea on Cabot back in October and that worked out pretty well. I am looking for a similar move this time.
Buy to open the March 21-strike puts on COG at $2.75 or better. These options expire on March 19, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $16.18. There appears to be potential support in the $16 area, so you will want to keep an eye on that. I recommend a stop at $20.00.
— Rick Pendergraft
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