The indices were mixed on Wednesday with three of the four moving higher and the Nasdaq dipped a little. All four were significantly higher in the opening minutes of the session, but the tech-heavy Nasdaq turned lower shortly thereafter and would finish with a loss of 0.04%.
On the plus side, the Russell jumped 1.88% as the leading index and the Dow tacked on 1.46%. The S&P moved up 0.60% to round out the gains.
Nine of the 10 main sectors moved higher on the day, and you guessed it, it was the tech sector that moved lower. The sector dropped 0.41% on the day.
The energy sector turned things around from Tuesday and jumped 2.46% to lead the way on Wednesday. The financial sector gained 2.01% and those were the only two that rallied more than 2.0%.
My scans turned negative last night which is unusual after the huge positive reading on Tuesday. There were only eight bullish signals generated while there were 29 bearish signals generated.
One oddity on the signals last night is that there were 13 bond ETFs on the bullish list. Because they are on bonds, the totals aren’t included in the figures above and they aren’t included in the calculation of the barometer.
Speaking of the barometer, it dropped quite a bit with the flip-flop in the scans. The final reading came in at 34.6, down from 60.6 the night before.
With very few actual stocks to choose from on the bullish list, today’s trade idea is a bearish one. Outfront Media (NYSE: OUT) appeared on the bearish scan and its fundamental ratings are pretty bad. The EPS rating is only 8 and the SMR rating is an E.
What jumped out to me on the chart was Tuesday’s candlestick and then the follow through yesterday. The pattern on Tuesday is what is called an inverted hammer and when it is followed by another down day, the pattern is confirmed. This pattern suggests that the momentum has shifted to the bears and a downward swing is likely.
Buy to open the April 22.50-strike puts on OUT at $1.55 or better. These options expire on April 16, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $19.40. The low in February was $19.93, so it will need to break through there to hit our target, but the stock was all the way down near $17 in January. I recommend a stop at $23.05.
— Rick Pendergraft
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