To receive further updates on this General Electric Company (NYSE:GE) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of Power Options Weekly today.
My indicators are giving solid sell signals this week, a downgrade from the past two weeks of bullish readings. The FANG stocks — Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOG) — have been leading the decline, which has caused the Nasdaq to underperform the S&P 500 and Dow Jones.
I’ve been anticipating a correction over the last few weeks and, while stocks performed better in August than I was expecting, the action we are seeing now is in line with the historically bearish month of September.
I don’t think that the current pullback is going to be as severe as what we saw back in January of this year because the United States is still attracting capital from all over the world, especially now with all of the turmoil in emerging markets.
China’s stock market is also showing signs of trouble, as the Shanghai Composite index is officially in bear market territory after falling more than 20% from its highs at the start of the year.
The Federal Reserve is acting as a drag on the market as well, and I’m still expecting to see one more rate hike from the Federal Open Market Committee (FOMC) before the end of the year. I do still think the U.S. is the place to be if you’re an investor, but with so many risk factors on the table, I’m sticking with the bearish camp this week.
If the market starts to turn higher later this month, I may start to get somewhat bullish again, but for now I’m recommending a bearish trade on a General Electric (NYSE:GE).
Buy to open the GE Dec 12 Puts (GE181221P00012000) at $0.55 or lower.
Follow our Facebook page to receive each Trade of the Day direct to your News Feed — and join the conversation.
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.
