The bears were in control for a third straight day on Wednesday and they were in control from the very beginning. The indices moved lower throughout the day and closed near the lows of the day.
The Russell took the worst hit at 3.26% and it was followed by the Nasdaq with a drop of 2.67%. The S&P fell 2.14% and the Dow managed to keep its loss to 1.99%.
Nine of the 10 main sectors fell once again and this time the energy sector was the lone one in the black with a gain of 0.48%.
The consumer discretionary sector fell 3.39% as the worst performer and it was followed by the tech sector with a decline of 2.81%. In all there were five sectors that dropped over 2.0%.
My scans remained negatively skewed last night with 35 bearish signals and nine bullish signals.
The barometer dropped a little more once these results were added in to the calculation, falling to -41 from -36.1.
None of the trade setups on the bullish side looked all that appealing to me. The one chart on the bearish side that stood out the most was on Activision Blizzard (Nasdaq: ATVI), but it has good fundamentals. The EPS rating is 79 and the SMR rating is an A. However, I believe the technical analysis wins out in the short term.
We see on the daily chart how the stock has been trending lower over the last three months and a trend line connects the highs. The stock just hit the trend line before turning lower yesterday. The daily stochastic indicators were approaching overbought territory before making a bearish crossover yesterday.
Buy to open the June 97.50-strike puts on ATVI at $6.50 or better. These options expire on June 18, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $86.10. This target is slightly below the low earlier this month, but I believe another drop to the $87.50 level could put a lot of pressure on that past support level. I suggest a stop at $95.80.
— Rick Pendergraft
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