Stocks got off to a rough start on Thursday and they got worse as the indices moved deeper in to negative territory in the early going. Things would turn around toward midday and all four would trim their losses. The Dow actually moved in to positive territory and remained there for a good portion of the day, but it would slip back in to negative territory at the end of the day.
The final results had all four indices losing ground with the Nasdaq taking the worst hit at -1.03%. The Russell fell 0.75% and the S&P dropped 0.36%. The Dow only lost 0.07% on the day.
The sectors were evenly split for a third straight day. The consumer discretionary sector fell 1.19% and that was the biggest move in either direction. The tech sector dropped 0.94% as the second worst performer.
On the plus side, the consumer staples sector gained 0.64% as the top performer and it was followed by the utilities sector with a gain of 0.58%.
The scans continued to move deeper in to negative territory on Thursday with 95 bearish signals and only eight bullish signals.
The barometer fell to -63.2 from -42.3 once these results were added in to the equation. This is the lowest reading for the indicator since April 30 and the second lowest in the last two months.
I hate to make three straight bearish trade ideas ahead of a big economic report like the May employment report, but there were just too many bearish setups compared to bullish ones. Today’s trade is on the KraneShares CSI China Internet (AMEX: KWEB) ETF. The fund appeared on the bearish list and of course we don’t have fundamental indicators on funds. What we do have is a bearish signal from Tickeron yesterday and the odds of a move lower over the next month are 88% based on the AI info.
The chart shows how the ETF has been moving lower over the last few months and the upper rail connects the highs from mid-March through now with the most recent hit being this week. The stochastic indicators were in overbought territory but made a bearish crossover last night. I look for another leg lower over the next two to four weeks.
Buy to open the August 72-strike puts on KWEB at $5.15 or better. These options expire on August 20, 2021. I suggest a target gain of 100% and that means the fund will need to drop to $61.70. The target is below the low from May, but based on the percentage declines in March and from the April high to the May low, I think the target is reasonable. I suggest a stop at $73.50.
— Rick Pendergraft
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