Trade of the Day: Sears Holding (NASDAQ:SHLD)

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sears logo shld stockMy indicators are giving bearish readings this week and, while the S&P 500 Volatility Index (VIX) is still under 15, which is not very high, I’m leaning towards the bearish side right now.

At this point, the VIX isn’t indicating that a severe crash is coming for the market. However, the major indices remain in an area where there is a lot of very heavy overhead resistance, which is part of the reason why the indices are bouncing around.

Additionally, we’re well into the month of May and, with everybody heading out the door to go on vacation and ignore the market for the summer, volume will likely be light, and trading could be choppy. June is not typically a good month for the markets either, so I would just expect to see more of this current trading range.

In macroeconomic news, the U.S. economy is not looking good at all. It was reported earlier this month that the number of Americans applying for unemployment benefits had jumped for the third week in a row to hit a 14-month high. Furthermore, the U.S. hardly grew at all last quarter, and things are kind of pointing to the downside for economic growth.

As far as stocks go, the only real winners right now are Amazon (AMZN) and Facebook (FB), which have basically held up the entire market. Amazon has really taken over the retail sector. It’s totally dominating and killing all other types of retailers, and that can be seen in the awful earnings reports from companies like Fossil (FOSL), Macy’s (M) and Nordstrom (JWN).

With the economy softening, I’ve flagged a play that has been on the downward slide going all the way back to early 2010. And with fresh new price lows, we’re likely to see more punishment ahead.

Buy to open the Sears Holdings (SHLD) Sep 10 Puts (SHLD160916P00010000) at $1.40 or lower.

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