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This morning, I am recommending a bearish trade on The Goodyear Tire & Rubber Company (NASDAQ:GT).
My indicators are giving neutral readings this week, a slight upgrade from last week’s bearish readings, as the S&P 500 continues to test strong resistance just above the 2,800 level.
The S&P briefly traded to a high of 2,821.24 on Wednesday, but it pulled back again on Thursday. This is the sixth time the index has tried and failed to close above the 2,815 level in the last six months. For now, I think the odds are that the market will head lower from here.
But as I have said many times before, the market is always out to fool as many traders as possible. Momentum to the upside has been relentless so far in 2019, so it is certainly possible that the bulls could prove the bears wrong.
I am maintaining my cautious stance as the S&P continues to battle with resistance. And for that reason, I am recommending a bearish position on GT.
GT is Making Lower Lows
The reason for this trade is primarily technical, though GT did miss earnings estimates in February. The company also lowered its operating income guidance. Generally, operating income tells us how much of a company’s revenue will become profits. It’s usually the company’s gross income minus operating expenses.
Lowering that estimate certainly didn’t help GT, but as we see in the chart below, the stock has been making lower lows since November of 2018.
Daily Chart of Goodyear Tire & Rubber Company (GT) — Chart Source: TradingView
GT doesn’t have any recent support at its current levels, and it is trading below both of its moving averages. Without any good news to boost prices, GT could keep heading lower as the broader market pulls back. I recommend a bearish put option with a strike at the $17 level in case the stock heads lower in the near term.
Buy to open the Goodyear Tire & Rubber (GT) July 19th $17 Puts (GT190719P00017000) at $1.00 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.