Trade of the Day: Ryder System (R)

Advertisement

While my indicators are giving bearish-to-neutral readings, at the risk of sounding like a broken record, I am still bearish after this week’s action. However, we could get a slightly bullish bias during the next few days because it’s the beginning of a new month, which is a historically positive period of time for stocks. But we are in what I now consider to be a bear market. To me, this means that there is only about a 50% chance we’ll see the broader market move higher.

That said, there is a lot of widespread bearishness among market participants, and I’m always uncomfortable following the herd. It’s a contrarian methodology, but if sentiment gets too bearish, the market will sometimes go the other way. There has been increased insider buying lately as well, which is also a bullish sign.

Ultimately, I’m watching the 2,000 level on the S&P 500 very closely and, if we break above that, it will tell me that the bulls have regained power of this bear market. However, I really don’t expect that to happen. There are many investors who are excited about the start of third-quarter earnings season, but my take is that it won’t be as good as some might think.

We remain in a dangerous period of time for stocks because October is when the market usually makes a bottom. Looking out past October, I believe we may see things start to turn more bullish in November and December, but I’ll continue to keep my trading strategies largely focused to the downside in the short term bear market until there is any kind of meaningful breakout.

But, for now, my system has found a stock with weakening technicals and a corresponding option that my probability analysis says has a higher likelihood of going higher in the short term.

Buy the Ryder System (R) Nov 65 Put options at $1.40 or lower. Ryder System closed Thursday at $71.80 After entry, take profits if R stock price hits $64.60 or the option price hits $3.90. Exit if the stock price closes above $75.40.

Regarding the Microsoft Corporation (MSFT) puts I recommended last week, MSFT approached my $45.50 stop loss but appears to be faltering here again. Continue holding the MSFT Nov. 20th $42 Puts and take profits if MSFT hits $40.70 or the puts hit $2.70. Exit if MSFT closes above $45.50.

And my instructions are similar for the GameStop (GME) Jan 36 Put options  I gave you on Sept. 19: Continue holding as GME looks to be breaking down. You may want to cash in quickly today as gains emerge; I always favor taking profits over holding out for more.

InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. It’s the perfect ‘bridge’ between investing in ordinary stocks and the turbocharged world of options trading.

Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990. Try Power Options Weekly today and receive 2 weeks for the price of 1 for only $19.95.


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/bear-market-r/.

©2024 InvestorPlace Media, LLC