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We are getting ready to enter a new month, the first few days of which are usually bullish as new capital gets put to work by professional traders. However, I’m still anticipating a pullback during the historically bearish month of September.
This has been the best August for stock market returns since 2014, but the rally over the past week was based on very low volume. That tells me that there may be less conviction in this move and, as many professional traders come back to work next week after the long weekend, markets could be brought back to reality.
The technology and health care sectors have been leading stocks higher during the latest move, but they are now highly overbought based on the indicators I’m watching. That doesn’t mean that they’ll stop going up, however, but it’s probably best to wait for a pullback before jumping into the market with new capital at this point.
In the meantime, I am seeing some bearish opportunities. Today I’m recommending one such trade on organic food and personal-goods manufacturer Hain Celestial Group Inc (NASDAQ:HAIN). HAIN is looking particularly vulnerable after turning in a disappointing quarterly report on Tuesday, which looks to be part of an ongoing trend for the company.
Buy to open the HAIN Oct 27 Puts (HAIN181019P00027000) at $0.70 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. 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.