Tuesday’s abbreviated trading session was very lackluster in terms of movement and volume. The indices were split on the day with two moving higher and two moving lower.
The Russell was the top performer with a gain of 0.23% and it was joined in positive territory by the Nasdaq with a gain of 0.08%. The Dow was the worst performer with a drop of 0.13% and the S&P fell by 0.02%.
[hana-code-insert name=’adsense-article’ /]The sectors were split, but not evenly.There were six that moved higher on Tuesday and four that moved lower. The top performance award was a tie between the consumer discretionary sector and the financial sector—both gained 0.23%.
As for the worst performance, that distinction went to the industrial sector which fell 0.40%.
The healthcare sector dropped 0.13% and that was the second worst loss of the bunch.
My scans turned a little more bearish on the day with 72 names on the bearish list and only five names on the bullish list.
The barometer dropped to -54.3 from -41.7 once these results were added in.
One thing that jumped out about the bearish list on Tuesday was the fact that the ETFs that represent the main indices were all on the list. It has been a while since those three all appeared on either list at the same time.
The one trade setup that stood out the most to me was on GrubHub (NYSE: GRUB). The stock appeared on the bearish list and the fundamental ratings aren’t terrible with a 53 EPS rating and a B SMR rating. However, it was the chart that really got my attention.
We see a trend line that connects the highs from September and October along with the high from July—that is before the gap higher that ended up being a false breakout. The stock just hit the trend line earlier this week. We see that big gap lower in October that came after a disappointing earnings report. The rally since then has basically filled that gap. We also see that the oscillators are in overbought territory and the stochastic readings made a bearish crossover on Tuesday.
Buy to open the February 50-strike puts on GRUB at $5.30 or better. These options expire on February 21. In order for these options to double the stock will need to drop to $39.60. The little pullback earlier this month took the stock below $39, so it won’t even have to break that low to double. I suggest a target gain of 100% with a stop at $50.00.
— Rick Pendergraft
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