Wednesday started on a positive note for most stocks, but things wouldn’t finish that way. Three of the four main indices opened higher while the Dow opened lower, once again following a pattern of it lagging the other indices. The Russell turned negative shortly after the open and it continued lower throughout the day.
The Nasdaq and S&P were both cruising along with decent gains, but a late bout of selling caused them to dip in to negative territory as well.
As for the final results, the Russell dropped 0.71% as the worst performer and it was followed by the Dow with a decline of 0.44%. The S&P dropped 0.18% and the Nasdaq only lost 0.09%.
Seven of the 10 sectors moved lower on the day and the industrial sector fell 1.04% as the worst performer. The financial sector dropped 0.94% and that was the second worst performance.
The healthcare sector jumped 1.0% and that was the top performance while the utilities sector was just behind it with a gain of 0.89%.
Wednesday’s scans turned more negative with the declines in the indices and the majority of sectors. There were 83 bearish signals and 19 bullish signals generated on the day.
The barometer turned slightly lower when these results were added in to the calculation, falling to -43.6 from -38.0.
There were three stocks on the bullish list that got my attention and five on the bearish list. After looking at the fundamentals and the charts, I decided a bearish trade on Danimer Scientific (NYSE: DNMR) was the best setup. The company’s fundamental ratings are poor with an EPS rating of 4 and a D on the SMR rating scale.
There were a couple of developments on the chart that got my attention. We see that the stock faced some resistance at $30 back in December and then that area acted as support in March. Now it could act as resistance as the stock tries to rebound. We also have a trend channel that defines the cycles within the overall downward trend. The lower rail has several points that connect to form it, but the upper rail isn’t as well defined. The parallel line connects with the high from March and now this week.
Buy to open the August 30-strike puts on DNMR at $7.10 or better. These options expire on August 20, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $17.57. The stock was down below the $15.50 level at the low in May, so it won’t have to break to a new low to reach our target. I suggest a stop at $30.30.
— Rick Pendergraft
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