Goodyear Deflated

Goodyear Blimp Deflated

Goodyear Blimp Deflated

Goodyear Tire issued an earnings warning and shares drove south.  Today the overall market extended its rally, albeit on light volume.  As I recently wrote, we may be approaching a turn.

When the market is up and the shares you’re watching are not, that is a sign of weakness.  The opposite is true, as well.  When individual shares are up in a down market, it’s a sign of their strength.

As you can see below, Goodyear literally left a skid mark on my daily candlestick chart.

Chart by Steven Sarnoff

Chart by Steven Sarnoff, h/t stockcharts.com

Intraday, when GT shares were trading a little above $21, a potential bearish engulfing line was forming at resistance.  The overall market was trading higher, with time set to start a turn toward underlying support.  A bearish upper shadow was forming from resistance on Goodyear’s weekly chart, entrenched in a down trend.  With technical price objectives much lower (as low as $7),  it already looks like a bad year for Goodyear.

The Goodyear April $21 put traded at $1.36, with GT at $21.10.  When nearby support at $20.05 broke, the decline accelerated.

Support is now at $18.67 and $17.  Resistance is now at $19.30-$20.50 and $21.40-$22.

Goodyear closed today at $19.00 and the April $21 put traded as high as $2.90, +113% in a single session.

That’s the Superleverage power of put options on display.

Options action like this is much fun for timely put buyers and nimble traders, not so for investors.

Best regards,

Steve

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