Market picture still negative
The intermediate-term market trend picture remains negative following another down week. Sentiment indicators are improving (i.e., market participants are becoming more bearish) but aren’t yet at extreme levels. The bottom line is that more downside action appears likely over the intermediate term.
New positions
CBS (CBS) – Last Tuesday I sold some December 25-strike puts on CBS as the stock dropped along with the market and continued weakness in the media sector:
The short- and intermediate-term trend is clearly down, but like many other stocks in the current market it’s extremely oversold. It appears to be bouncing off of support at the 25-1/2 to 26 level, but it’s too soon to tell if the short-term downtrend is reversing. Near-term upside resistance appears to be at around 27 to 27-1/2.
Foot Locker (FL) – Last Tuesday I sold some December 12.5-strike puts on FL as the stock dropped along with the market and continued weakness in the retail sector:
The short- and intermediate-term trend is clearly down, but the stock is extremely oversold and testing support in the 11-1/2 to 12 area. Near-term upside resistance is at 14-15.
Nordstrom (JWN) – Last Monday I sold some December 25-strike puts on JWN as the stock dropped on market weakness, continued weakness in the retail sector, and jitters over the company’s upcoming third-quarter earnings announcement:
The intermediate-term trend here is clearly down, although the stock is oversold and showing short-term strength after bouncing off of support at the 31-32 level following the company’s announcement of better-than-expected earnings. Near-term upside resistance appears to be about 36-38. A break below 31 would suggest a test of next lower support at around 26-27.
Watchlists
“Upside strength” candidates of interest this week include Bally Technologies (BYI), Consolidated Edison (ED), Johnson & Johnson (JNJ), Progress Energy (PGN), and UST Inc. (UST).
Candidates of interest on the “oversold” scans include American Greeting (AM), American Standard Companies (ASD), Belden CDT (BDC), General Electric (GE), MetLife (MET), and Paychex (PAYX).
