by Shane Ormond
On May 21, 2020
Target reported that online sales on an average day in April exceeded last year’s Cyber-Monday sale, because if you’re not going to buy a Cuisinart Perfectemp 14 Cup Programmable Coffee Maker at the end of the world, when are you gunna buy one?
Market Update: After a great deal of intervention by the Fed, coupled with the hope that Congress will be able to pass a stimulus bill to aid those out of work, the futures this morning pointed towards a positive day in the markets.
Though we may start off in the green, we are still firmly in a bear market as the major indexes are still around 30% off from their previous highs.
The good news is that even in a bear market, traders can make a profit if they utilize the right strategy.
My PowerTrend system applies just as well in bearish markets. I shift my focus from bullish call options and call option spreads to bearish put options and put option spreads, but the underlying system remains the same.
Now, let’s beat the bear market and start making money.
On Friday, we looked at a Daily Price Chart and an On Balance Volume Chart for Cummins Inc., noting that the stock has been in a price downtrend.
Today’s Chart of the Day is a Daily Price Chart for Blackbaud Inc. (NYSE: BLKB).
Blackbaud, Inc. provides cloud software solutions to nonprofits, foundations, companies, education institutions, healthcare organizations, and individual change agents in the United States and internationally. The company offers fundraising and relationship management solutions and services, including Blackbaud Raiser’s Edge NXT, Blackbaud CRM, Blackbaud eTapestry, Blackbaud TeamRaiser, and more.
Now, below is a Daily Price Chart for Blackbaud Inc.
Back in November 2019, the BLKB 1-Month price crossed below the 10-Month simple moving-average (SMA) indicating BLKB is on a PowerTrend ‘sell’ signal (circled).
Guess what happened next…
Sure enough, prices continued to fall.
Since the PowerTrend ‘sell’ signal occurred for the stock back in November, when the stock was around $82.88, the stock has dropped 37.8%.
Now, as you can see, the 1-Month moving-average is still below the 10-Month SMA. That means the bearish trend is still in play!
This bearish price trend makes BLKB a good candidate for a put option purchase.
As long as the 1-Month price remains below the 10-Month SMA, the stock is more likely to keep trading at new lows in the coming days and weeks.
We’ll be keeping our eye on this stock as it continues to trend downward so we’ll know the moment the market conditions shift and the stock begins to come back up offering a better buying opportunity in a bearish market.
Additionally, we’d like to talk about how a previous Chart of the Day stock has done…
On March 17th, we highlighted American Airlines Group Inc. (NYSE: AAL), noting that AAL’s 1-Month price was trading below the 10-Month SMA.
Since March 17th, AAL shares have dropped 33.85%.
If you had purchased the right put option contract, you would be up 112.95% in less than a weeks’ time!
That’s the power of options.
Editor, Chart Of The Day