Stocks got off to a rough start on Thursday, but fortunately they were able to rebound a little throughout the day. All four of the main indices did move lower on the day, but all four closed well off their lows.
The Russell was the worst performer on the day with a decline of 0.94% and it was followed by the S&P which dropped 0.86%. The Dow fell 0.75% and the Nasdaq lost 0.72% to round out the final numbers.
All 10 main sectors dropped on the day and the worst performance came from the financial sector with a drop of 2.0%. The industrial sector fell 1.39% and the materials sector was right behind with a loss of 1.36%.
The consumer discretionary sector lost 0.25% for the smallest loss on the day. Utilities dropped 0.29% on the day and consumer staples fell 0.37%. Those were the only three sectors that kept the losses under 0.50%.
My scans turned slightly more negative last night and that makes three straight negative results. There were 33 bearish signals generated and 12 bullish signals.
The barometer dropped in to negative territory once these results were added in to the calculation, falling from 0.4 to -10.1.
I had been seeking balance from the trade ideas in the last few days, but couldn’t find a bearish setup that I liked. With the large number of stocks and ETFs on the bearish list last night I was able to find a bearish trade that I liked. The stock is BigCommerce Holdings (Nasdaq: BIGC) and the company’s fundamental ratings aren’t very good. The EPS rating is a 42 and it doesn’t have an SMR rating because the company has been losing money up to this point and has a negative ROE of -47%. The profit margin is also negative at -25.4%.
Looking at the daily chart from when the stock went public last August we see how it has been trending lower. A trend channel has formed since last October and the stock just hit the upper rail of the channel. In the instances in October and in February when the stock reversed, forming the upper rail, it dropped sharply over the next month. It fell over 40% in both cases.
Buy to open the August 75-strike puts on BIGC at $10.15 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 $57.25. The stock was down near $42 in May, so it won’t have to break to a new low to hit our target. I recommend a stop at $73.50.
— Rick Pendergraft
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