Stocks were mixed on Wednesday as investors grappled with mixed earnings results from widely held names like Microsoft and Alphabet and attempted to interpret how the Fed will move in the future. Three of the four main indices would finish lower and one would finish higher on the day. The Russell tacked on 0.13% as the lone index in the black on the day.
The Dow was the worst performer on the day with a drop of 0.48%. The Nasdaq fell 0.28% and the S&P dropped in the closing minutes to finish with a loss of 0.08%.
On the sector front we finished with an even split—five finished higher and five finished lower. The energy sector led the way with a gain of 3.45% and it was followed by the communication services sector with a gain of 0.92%.
The tech sector dropped 0.93% as the worst performer and that was mostly due to Microsoft’s decline. The healthcare sector fell 0.30% as the second biggest loss.
My scans turned more negative last night with 41 bearish signals and not a single bullish signal.
The barometer dropped back in to negative territory once these results were added in to the calculation, falling to -13.3 from +8.1.
Obviously without any stocks or ETFs on the bullish list, today’s trade idea is a bearish one. There were a few trade setups that stood out, but I felt the one for NIO Inc. (NYSE: NIO) would give us the greatest odds of success. The company scores a 50 on the EPS rating which is average, but the SMR rating is below average at a D.
After a big run up in the second half of 2020, NIO has hit a bit of a rough patch in 2021. The stock fell below its 50-day moving average in February and now seems to be seeing the trend line act as resistance. We see how the stock used the 50-day as support in December, just before its last leg higher.
Buy to open the June 45-strike puts on NIO at $6.40 or better. These options expire on June 18, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $32.20. The stock was below the $32 level back in early March, so it won’t have to break that low to hit our target. I suggest a stop at $44.00.
— Rick Pendergraft
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