Tuesday was a rather odd day for stocks. All four indices opened sharply lower and all 10 sectors were lower shortly after the open. The Dow would rally and would manage to finish with a gain of 0.06%, but the other three indices finished with losses.

The S&P did manage to rally and finished with a loss of 0.67%, but that was considerably better than where it was in the morning session. The Russell fell 1.28% and the Nasdaq took the worst hit at 1.88%.

The sector action was even stranger when you consider how the indices ended the day. Five sectors would rally to post gains while the other five would finish lower. The materials sector led the way with a gain of 1.09% and the financial sector moved up 0.80% as the second best performer.

On the down side, the tech sector fell 1.79% and was by far the worst performer. The consumer discretionary sector dropped 1.04% and the communication services sector lost 0.90%.

My scans remained negatively skewed last night, but the difference between the two lists shrank once again. There were 29 bearish signals and eight bullish signals.

The barometer continued to climb with the difference shrinking. Tuesday’s reading was -40.3, up from -54.6 on Monday.

I made a misstatement in yesterday’s article. I forgot the bullish trade idea on Albertson’s on Friday, so the last three ideas have been bullish, bearish, and bullish. Today’s trade idea is a bearish one, so the alternating pattern continues.  National Oilwell Varco (NYSE: NOV) appeared on the bearish list and it has mixed fundamentals. The EPS rating is average at 47, but the SMR rating is an E.

What I saw on the chart was a head-and-shoulders pattern forming. The pattern is about as clean of an H&S as I’ve seen and it is a bearish signal. For the pattern to complete itself, the stock will need to drop back down to the neckline in the $12.50 area. We also see on the chart that both the RSI and the stochastics were in overbought territory. The last time that happened was when the head was formed in March.

Buy to open the June 17-strike puts on NOV at $2.10 or better. These options expire on June 18, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $12.80. That target is slightly above the neckline so it won’t have to break to a new low to reach our target. I suggest a stop at $16.40.

— Rick Pendergraft

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