Stocks limped in to the end of the week on Friday and all four indices lost ground on the day. All four did gain ground for the week, so over all it was a good week for the bulls. The Russell suffered the most dramatic loss on Friday at 0.89%. The Nasdaq had the second worst loss at 0.24%. The Dow and S&P experienced identical declines of 0.13%.
Six of the 10 main sectors fell on the day with the industrial sector taking the worst hit at 0.53%. The tech sector finished with the second worst loss at 0.47% and it was followed closely by the consumer discretionary sector with a drop of 0.46%.
[hana-code-insert name=’adsense-article’ /]The energy sector led the way for a second straight day with a gain of 0.72% on Friday.The healthcare sector finished with the second best result by moving up 0.48%.
My scans turned sharply more negative on Friday with 62 names on the bearish list and only six names on the bullish list.
That is the biggest negative reading since June 12.
The barometer dropped to -35.2 once these results were added in to the equation.
Once again with the bulk of the signals coming from the bearish side of the ledger, today’s trade idea is another put recommendation.
Steel Dynamics (Nasdaq: STLD) appeared on the bearish list, but it actually has really good fundamental readings. The EPS rating is a 90 and the SMR rating is an A, but the chart and the option pricing were the determining factors.
We see that despite the fundamentals, Steel Dynamics has been trending lower and now it is facing resistance from its 50-day moving average. It is also overbought and the stochastic readings made a bearish crossover on Friday. The stock was set up in a similar fashion in April before it fell from the $36 area all the way down to the $25 area.
Buy to open the August 30-strike puts on STLD at $2.20 or better. These options expire on August 16. In order for these options to double the stock will need to drop to $25.60, meaning it won’t have to break to a new low. I suggest a target gain of 100% with a stop at $30.60.
— Rick Pendergraft
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