After big gains on Friday and decent gains on Monday, investors decided to take a more cautious stance as earnings season kicked off Tuesday morning. All four of the main indices fell on the day and only two found themselves in positive territory at any point during the day.
The Russell was the only one of the indices that got hit very hard, falling 1.86%. The Nasdaq dropped 0.38%, the S&P lost 0.35%, and the Dow declined 0.31%.
Nine of the 10 main sectors lost ground on the day with only the tech sector eking out a gain of 0.44%.
The consumer discretionary sector took the biggest loss at 1.15% and it was followed by the financial sector with a drop of 1.08%. Those were the only two that declined more than 1.0% on the day.
My scans generated 27 bearish signals and nine bullish signals last night, snapping two straight days of positive results.
The barometer dropped to 20.0 from 37.2 once the results from Tuesday were added in to the calculation.
I’ve only had one bearish trade idea for readers in the last eight trading days and really went looking for another one. The one signal that got my attention was on CMS Energy (NYSE: CMS). The company’s fundamentals are actually pretty good, but the chart got my attention. The EPS rating is 78 and the SMR rating is a B.
We see how the stock has been trending lower with a channel forming. With inflation concerns rising and the Fed signaling that it is likely to hike sooner rather than later, utility companies have come under selling pressure as a result. CMS hit the upper rail of its channel on Friday and looks like it is ready to make its next move lower. In the five weeks from the May peak, the stock dropped approximately 11.3% and I’m looking for a similar move this time.
Buy to open the September 60-strike puts on CMS at $2.30 or better. These options expire on September 17, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $55.40—a drop of 7.7%. I suggest a stop at $61.00.
-Rick Pendergraft
Instant Cash Payouts: How I Sell Put Options for Safe Passive Income
In this video, I tell you about my put-selling strategy, introduce you to the seven rules I follow when selling put options, walk you through two recent trades I made with Starbucks (SBUX) where I sold puts that generated a total of $760 in income… and tell you about what I believe are the three biggest downsides to selling put options.