The indices primarily moved to the downside yesterday with three of the four moving lower. The Russell managed a solid gain of 0.92%. The S&P fell 0.26% and that was the worst performance of the bunch. The Nasdaq dropped 0.24% and the Dow suffered the smallest loss at 0.09%.
Six of the 10 main sectors fell on Tuesday and the utilities sector was the worst performer with a decline of 0.76%. The consumer discretionary sector dropped 0.68% and that was the second worst decline.
[hana-code-insert name=’adsense-article’ /]The energy sector was the best performer of the day with a gain of 1.16% and that was the only gain over one percent.The materials sector moved up 0.65% and that was good enough for second place.
My scans turned the table last night and showed 20 names on the bullish list and only 15 on the bearish list.
The final count does come with a caveat— of the 20 names on the bullish list, 16 were from the energy sector.
Even with the positive total the barometer remained in negative territory.
The final reading was -23.6 after a reading of -30.8 on Monday.
Looking through the list of energy stocks, none of the charts looked like a bullish set up with the exception of Royal Dutch Shell and it was the subject of the trade of the day last week. With that in mind today’s trade idea is a bearish one on Tapestry (NYSE: TPR). The stock appeared on the bearish list and the fundamental ratings are mixed. The EPS rating is below average at 34 while the SMR rating is a B.
Looking at the chart we see a downward trend for quite some time. Since the big drop lower in October, the attempts to bounce back have been connected with a trend line with the exception of the one day in May. When the stock touched the trend line in early July it dipped, but not as much as the other drops. I don’t think the stock has hit bottom yet.
Buy to open the September 32.50-strike puts on TPR at $3.10 or better. These options expire on September 20.In order for these options to double the stock will need to drop to $26.30. The times the stock hit the trend line in October, February, and May all produced declines of at least 20%. For the decline from the July point to hit 20%, the stock would need to drop below $26. I suggest a target gain of 100% with a stop at $31.50.
— Rick Pendergraft
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