Trade Eversource Energy (NYSE: ES) That’s Due for a Downward Leg

Monday finished with mixed results from the indices and that is better than investors could have hoped for after word spread that hedge fund Archegos blew up over the weekend. When the futures markets opened on Sunday night we were looking at pretty significant losses across the board. Investors seemed to calm down throughout the day and one index finished with a gain while the others finished with varying losses.

The Dow gained 0.30% on the day and the S&P finished with a minor loss of only 0.09%. The Nasdaq fell 0.60% and the Russell tumbled 2.83%.

The sectors were split evenly on the day with five moving higher and five moving lower. Utilities led the way with a gain of 1.07% and the communication services sector gained 1.02% as the second best performer. The consumer staples sector moved up 1.01% to give us three sectors with gains of 1.0% or more.

On the down side, the energy sector fell 1.19% as the worst performer and it was followed by the financial sector which dropped 0.87%.

My scans turned in their fifth straight positive result last night with 41 bullish signals and seven bearish signals.

The barometer inched slightly lower once these results were added in to the equation, dropping to 50.5 from 52.6.

I mentioned Eversource Energy (NYSE: ES) in yesterday’s trade idea, but chose to use a stock from the bullish list instead. I didn’t really like any of the trade setups for either side last night, so I have a bearish trade idea on Eversource today. The company has decent fundamental ratings with an EPS of 73 and an SMR rating of a B, but the chart paints a different picture.

The daily chart shows how a trend line connects the highs from November and January, and now March. The stock is overbought based on the 10-day RSI and the daily stochastic indicators. The stochastic indicators made a bearish crossover on Friday and it looks like the stock is due for another downward leg.

Buy to open the July 90-strike puts on ES at $7.30 or better. These options expire on July 16, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $77.22. I looked at the May options as well, but the asking price on the May puts was higher than the July puts. I recommend a stop at $89.00.

— Rick Pendergraft

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Rick Pendergraft, Trades Of The Day

Rick Pendergraft has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick's analysis process includes fundamental, sentiment and technical analysis.