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.
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.