It was another unusual day for stocks on Tuesday as two of the indices moved higher and two moved lower. The Russell continued to outpace the others with a gain of 1.88% and the Dow gained 0.88% to join it on the plus side.
The Nasdaq fell 1.37% as the worst performing index for a second straight day and the S&P lost 0.14% to join it in the red.
We saw a little better performance out of the sectors as seven of the 10 moved higher. The energy sector led the way once again, this time with a gain of 3.24%. The consumer staples sector gained 1.97% as the second best performer and it was followed by the industrial sector which moved up 1.76%.
The tech sector was the worst performing sector with a loss of 1.91%. The consumer discretionary sector fell 0.35% and the communication services sector dropped 0.32%.
My scans continue to get more and more negative with 101 bearish signals on Tuesday and only one bullish signal.
The barometer dropped to -63.2 from -32 once these results were added in to the calculation. That’s the lowest reading since October 15, right as the market went through a small pullback.
With the big negative reading on the barometer and the lack of bullish to consider, it should come as no surprise that today’s trade idea is a second straight bearish idea. Outfront Media (NYSE: OUT) appeared on the bearish list and the company’s fundamentals are pretty poor with an EPS rating of 7 and an SMR rating of a D.
The pattern from the last two days looks eerily similar to the pattern in June when the stock gapped higher and then moved down the next day. The 10-day RSI was in overbought territory and then rolled over. The stock would eventually drop over 40% from its high and it did so in one month. A similar move this time would put the stock down at $12.00.
Buy to open the December 20-strike puts on OUT at $2.75 or better. These options expire on December 18, 2020. I suggest a target gain of 100% and that means the stock will need to drop to $14.50. The stock was well below that level in each of the last four months. I recommend a stop at $20.50.
— Rick Pendergraft
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