Stocks got off to a rough start this week with the Nasdaq and the Russell both taking pretty big hits. The Dow was in positive territory for most of the day, but it turned lower in the afternoon session and would finish with a loss of 0.10%.

The S&P hovered near breakeven throughout the morning, and it turned sharply lower in the afternoon to finish with a loss of 1.04%. The Nasdaq took the worst hit with a drop of 2.55% and the Russell fell 2.37%.

The sectors were evenly split on Monday with five moving higher and five moving lower. Unfortunately the losses were considerably greater than the gains. The tech sector tumbled 2.5% as the worst performer. The communication services sector dropped 1.92%  and the consumer discretionary sector fell 1.74% as the second and third worst performers.

Utilities stocks led the way and the sector gained 1.0%. The consumer staples sector gained 0.79% as the second best performer and that suggests that investors were seeking safety.

My scans turned bearish last night, snapping a string of three straight positive results. There were 122 bearish signals and 20 bullish signals.

The barometer dropped in to negative territory with a reading of -17.2 from -32.2.

After three straight bullish trade ideas I have a bearish idea for you today. Baker Hughes (NYSE: BKR) appeared on the bearish list and the fundamental ratings are mixed. The EPS rating is above average at 65, but the SMR rating is below average with a grade of a D.

Two things really jumped out at me from the chart. First, the pattern from yesterday’s candlestick looks to be a shooting star. This pattern forms after a rally and indicates that a top may have been put in. The second thing that jumped out was how high the overbought/oversold indicators are at this time. The last time we saw the indicators this high at the same time was in December, just before the downturn.

Buy to open the July 26-strike puts on BKR at $2.65 or better. These options expire on July 16, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $20.70. The stock was below $19 in April, so it won’t have to break to a new low to hit our target. I suggest a stop at $25.50.

— Rick Pendergraft

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