Stocks didn’t vary very much on Friday as the indices moved around a little in the early going and then changed very little in the second half of the day. Retail sales were a little disappointing and that could have been a hindrance to moving higher.
Three of the four indices would move higher on the day, but the gains were minimal. The Nasdaq led the way with a gain of 0.20%. The Dow and the S&P both gained 0.01% and hugged the breakeven point throughout the afternoon. The Russell was the lone index to lose ground, falling 0.42% on the day.
[hana-code-insert name=’adsense-article’ /]Six of the 10 main sectors fell on the day.It was a close race for the worst performance with the materials sector falling 0.77% and the energy sector dropping 0.76%.
The utilities sector led the way with a gain of 0.78% with the tech sector turning in the second best performance with a gain of 0.66%.
My scans flipped back to a bearish skew on Friday with 50 stocks and ETFs on the bearish list and 16 on the bullish side.
The barometer dropped from -15.1 to -22.3 once these results were added in to the equation.
I don’t like to load up on options for one particular sector with the daily trade ideas, but I couldn’t help but suggest another bearish play from the energy sector. EOG Resources (NYSE: EOG) appeared on the bearish list on Friday and the fundamental ratings are mixed. The EPS rating is bad at 17, but the SMR rating is a B.
What sold me on EOG as the trade idea was the daily chart. We see that the stock has been trending lower and that a trend channel has formed. The stock is near the upper rail of the channel and the daily stochastic readings are in overbought territory. The stochastic readings made a bearish crossover on Friday and the 10-day RSI was above the 65 level. When that happened in September and in June, the stock moved sharply lower over the next few months.
Buy to open the February 77.50-strike puts on EOG at $5.50 or better. These options expire on February 21. In order for these options to double the stock will need to drop to $66.50. The stock will need to break below the low from earlier this month, but it won’t have to break to a new 52-week low to hit our target. I suggest a target gain of 100% with a stop at $78.50.
— Rick Pendergraft
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