For the majority of the indices, Thursday got off to a bad start and then only got worse as the day went on. The Dow managed to open higher, but it turned lower in the afternoon and joined the other indices in negative territory. All four would finish in the red, but the losses varied considerably.
The Nasdaq took the biggest loss at 3.02% and the Russell tumbled 2.94%. The S&P was in the red all day as well and it lost 1.48% while the Dow kept its loss to 0.46%.
Nine of the 10 main sectors dropped on the day with only the financial sector finishing on the positive side of the ledger. The sector gained 0.52% as interest rates rose again.
The energy sector plunged 4.49% as the worst performer on Thursday and the decline was fueled by an 8.34% drop in oil prices. The tech sector fell 2.77% and the consumer discretionary sector dropped 2.51%.
My scans took another turn further to the negative side. Last night’s results showed 164 bearish signals and only one bullish signal.
The barometer plunged from -95.0 to -129.3 and that is the worst reading since last April.
Even with only one stock on the bullish list, believe it or not, I did like the setup. However, I felt the odds were better for a successful bearish trade on CenterPoint Energy (NYSE: CNP). The company’s fundamental ratings are average with an EPS rating of 58 and an SMR rating of a B.
The trend channel on CNP is a little different as I drew the lower rail first and then drew a parallel upper rail that connected the highs from November and this past week. We see that the stock was overbought based on the RSI and stochastics. Both indicators hadn’t been in overbought territory since the November high.
Buy to open the May 24-strike puts on CNP at $2.60 or better. These options expire on May 21, 2021. I suggest a target gain of 100% and that would require that the stock drop to $18.80. The target is below the low from February, but right in line with where the lower rail is at this time. I recommend a stop at $22.90.
— Rick Pendergraft
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