Wednesday saw mixed results and a bit of a flip in the results. Where the Dow and Russell had been leading the indices while the Nasdaq has trailed, the opposite was true on Wednesday. The Nasdaq gained 0.48% on the day and it was the only index to gain ground.
The Dow fell 0.58% and the Russell dropped 0.46% as the two worst performers. The S&P lost 0.16% on the day.
Seven of the 10 sectors lost ground on Wednesday. The utilities sector led the way with a gain of 0.26% while the tech sector gained 0.21% and the consumer discretionary sector tacked on 0.12%.
The energy sector fell 2.33% as the worst performer and the materials sector dropped 1.04% as the second worst performer. Those were the only two sectors that lost more than 1.0%.
My scans were negatively skewed again on Wednesday with 28 bearish signals and 11 bullish signals.
Even with the negative skew, the barometer continued to climb back toward positive territory with a reading of -15.0 and that was up from -33.7.
Wednesday’s bearish trade idea didn’t work out very well as it was announced in the morning that Salesforce.com was pursuing an acquisition of the Slack Technologies and that sent the stock soaring.
Despite the setback on Wednesday, I have another bearish trade idea for you today. The company is Nikola (Nasdaq: NKLA) and its fundamentals are terrible. The EPS rating is a 4 and there isn’t an SMR rating because the company has yet to produce a profit and that means you can’t calculate the return on equity or the profit margin. The company is an electric vehicle manufacturer and they have been rallying sharply lately, with companies like Nikola being lifted with the others, even though the fundamentals aren’t there.
We see on the daily chart that the stock has been trending lower since peaking up near $95 back in June. The stock dropped sharply in the month that followed and then rallied back up to the $55 area. There is a loose trend channel that has formed and the stock just hit the upper rail of the channel. I look for another leg lower to take the stock back below the $20 level.
Buy to open the January 35-strike puts on NKLA at $5.00 or better. These options expire on January 15, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $18.35. The stock was down below that price in both September and earlier in November. I suggest a stop at $35.00.
— Rick Pendergraft
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