Friday was another rough day for stocks with all four indices experiencing sharp losses. The Nasdaq got hit the hardest with a loss of 3.05% and it was followed by the S&P with a loss of 2.33%. The Dow dropped 2.24% and the Russell was the best performer, but still lost 1.98%.
Nine of the 10 main sectors declined on Friday with the utilities sector being the lone one in the green on the day with a gain of 0.37%.
[hana-code-insert name=’adsense-article’ /]The tech sector was the worst performer with a drop of 3.52% and it was the only one that lost more than three percent.There were four sectors that lost over two percent—consumer discretionary (-2.99%), industrials (-2.63%), healthcare (-2.55%), and the materials sector (-2.41%).
My scans were negatively skewed for the sixth straight night with 20 bearish signals and five bullish signals.
The barometer did move higher after these results were added in, climbing from -64.9 to -47.7.
As much as I would like to offer you a bullish trade idea, there just haven’t been any stocks that I have liked enough to give you one.
Once again I have a bearish trade idea for you. Docusign, Inc. (Nasdaq: DOCU) appeared on the bearish list and the company doesn’t have the best fundamentals. It scores a 44 on the EPS rating and a D in the SMR rating.
Docusign made its debut on the market in late April so we don’t have a long history here. What caught my eye was the stock hitting its 50-day moving average and turning lower after it hit the trendline. The stock was in overbought territory based on the daily stochastic readings and the indicators made a bearish crossover on Friday. We see that the last time this happened the stock fell from $45 to the $35 area.
Buy to open the January $40-strike puts on DOCU at $3.50 or better. These options expire on January 18. For these options to double, the stock will need to drop to $33.00. Based on the recent drop after the stochastic crossover, I am looking for a drop down below the $35 level. I suggest a target gain of 100% with a stop at $41.00.
— Rick Pendergraft
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