Swing Trade Idea (CMI) – May 21, 2024
Our bearish trade for Tuesday, May 21st is Cummins Inc. (CMI). CMI is part of the industrial sector, which has performed at 4.23% over the last month, with CMI underperforming at -0.95% over the same period.
CMI started to pull back from the top of an uptrend channel and recently formed a double top, which confirms our bearish bias. CMI has been underperforming relative to its sector and will likely continue to trade lower over the duration of this trade, with the next area of support at around $265. We recommend playing a Credit Spread that collects over 45% premium over the width, which is an excellent risk/reward ratio.
As a close, if CMI were to trade below $295 for multiple days, this would invalidate our analysis and we will consider cutting losses on the trade. We will also consider cutting losses on this options trade if the value of the vertical spread moves above $13.80 Debit.
