The Fed kept interest rates the same at yesterday’s FOMC meeting and stocks were rather stagnant throughout the day as investors waited on the news. The indices were split heading in to the announcement with the Dow and Russell hovering in negative territory. After the announcement those two indices rallied to give is gains across the board.
The Nasdaq led the way with a gain of 0.44% and it was followed by the S&P with a gain of 0.29%. The Dow moved up 0.11% on the day and the Russell eked out a gain of 0.01%.
[hana-code-insert name=’adsense-article’ /]Eight of the 10 sectors moved higher on Wednesday and two moved lower.The materials sector was the top performer with a gain of 0.75%. The tech sector tacked on 0.68% and was the second best performer.
The financial sector fell 0.26% as the worst performer and the energy sector joined it in negative territory with a loss of 0.17%.
My scans turned in a third straight bearish result on Wednesday with 43 names on the bearish list and 12 on the bullish list.
The barometer dropped back in to negative territory as a result of the recent negative scans. The final reading came in at -17.3, dropping from 0.
Today’s trade idea is a bearish one on Nisource (NYSE: NI). The company appeared on the bearish list and it doesn’t have very good fundamental ratings. The EPS rating is a 35 and the SMR rating is a C.
What really got my attention was the chart. Several things stood out including the stochastic readings being overbought territory and the importance of the $27 level. The stochastic readings are in overbought territory and just made a bearish crossover. The last few times this has happened, the stock has dropped rather sharply. The $27 level was support in May and the recent decline stalled at the same area in October. Now that the stock is below that level, I look for it to act as resistance.
Buy to open the January 27-strike puts on NI at $0.65 or better. These options expire on January 17. In order for these options to double the stock will need to fall to $25.70. The stock only needs to fall a little over 5% from the high yesterday to hit our target. Each of the last few times the stochastic readings have made a bearish crossover, the stock has dropped at least 6%. I suggest a target gain of 100% with a stop at $27.25.
— Rick Pendergraft
[hana-code-insert name=’oxford 2′ /]