The second quarter got off to a rough start on Wednesday with all four main indices getting hit with significant losses. I have to wonder if the gains from last week weren’t partly due to window dressing for the end of quarter stats from portfolio managers.
The Russell took a much bigger hit than the other three indices as it dropped 7.03%. The Dow lost 4.44% as the second worst performer while the Nasdaq and S&P each declined 4.41%.
All 10 main sectors dropped on Wednesday with the financial sector falling the most at 6.10%.Utilities lost 6.01% and those were the only two sectors to lose more than 6%.
The consumer staples sector took the smallest loss at 1.69%.
The healthcare sector dropped 3.8% and that was the second smallest loss.
My scans continued to move to a more negative stance with 72 bearish signals and only one bullish signal.
The barometer dropped to -40.9 from -14.2 thanks to these results. The reading is the lowest one we have seen since February 20—right as the selloff was getting started.
Once again we have a bearish trade idea and that makes it four straight days with bearish trades. In the case of today, Marvell Technology Group (Nasdaq: MRVL) was on the bearish list and its fundamentals were weak. The company scores a 31 on the EPS rating system and it scores a D on the SMR grading scale.
The chart shows how the stock hit resistance at its 50-day moving average on Tuesday and then moved lower yesterday. We see a similar pattern in early March, just before the stock fell from the $24 range down below $17. The stochastic indicators are in overbought territory and made a bearish crossover last night.
Buy to open the May 24-strike puts on MRVL at $3.35 or better. These options expire on May 15. For these options to double, the stock will need to drop to $17.30. The stock was below $17 in March, so it won’t have to reach a new low to reach our target. I suggest a target gain of 100% with a stop at $23.60.
— Rick Pendergraft
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