Tuesday started on a positive note with all four indices opening higher, but the positivity didn’t last long and all four would drop in to negative territory before midday. The selling accelerated in the afternoon and all four indices finished near the lows of the day.
The Russell dropped 0.84% and that was the worst performance on the day. The Dow fell 0.24% and the S&P declined 0.21%. The Nasdaq held up the best, but it still lost 0.03%.
Six of the 10 sectors lost ground while four moved higher. The energy sector tumbled 2.03% as the worst performer and it was followed by the utilities sector with a drop of 1.2%. The financial sector fell 1.01% to give us three sectors with losses greater than 1.0%.
The consumer discretionary sector gained 0.34% and that was the best performance for the day. The other three sectors that moved higher gained less than 0.05%.
My scans flipped to a negative result last night with 29 bearish signals and 13 bullish signals.
The barometer changed very little once the results from Tuesday were added in to the equation. The final reading was -1.2 and that was up from -2.7 on Monday.
After three straight bullish trade ideas, I have a bearish one for you today. The subject company is Peloton Interactive (Nasdaq: PTON) and it was on the bearish list last night. The company’s fundamentals aren’t terrible with an EPS rating of 60 and an SMR rating of a C, but the chart is too clear to ignore.
We see how the stock has been trending lower since peaking in January and now a downwardly sloped trend channel has formed. The upper rail connects the peak with the highs from February and April, and now the stock is hitting the upper rail. The 50-day moving average is right in the same area and that gives it two layers of resistance it has to break through. I look for the stock to make its next move lower over the coming weeks.
Buy to open the July 105-strike puts on PTON at $11.15 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 $82.70. The stock was down near the $80 level in early May, so it won’t have to break that low to hit our target. I suggest a stop at $104.50.
— Rick Pendergraft
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