The three main indices all experienced gains yesterday after the announcement that China and the U.S. were calling a truce in the battle of trade tariffs. Due to industrial companies seeing some of the biggest benefits from the truce, the Dow led the way on Monday with a gain of 1.21%. The S&P gained 0.74% and the Nasdaq lagged the other two, but still managed a gain of 0.54%.
All ten sectors gained ground yesterday and as I mentioned earlier the industrial sector benefited from the news more than the others and the sector gained 1.53%.
[hana-code-insert name=’adsense-article’ /]The telecom sector gained 1.14% and the energy sector gained 1.01% as the only other sectors to gain over one percent.The healthcare sector was the worst performer, but in the end it still gained 0.13%.
My scans continued to produce more bearish results and that was a little surprising given the big up day.
The tallies for Monday night’s scans were 35 names on the bearish list and 31 names on the bullish list.
The barometer remains in negative territory with a reading of -14.1.
Goodyear Tire & Rubber (Nasdaq: GT) appeared on the bearish list last night and it is my choice for a trade idea today. The company hasn’t been the best fundamental performer in recent years. Goodyear saw EPS drop by 32% in the most recent quarter and sales have been shrinking at a rate of 5% per year over the last three years.
We see on the daily chart how Goodyear has been trending lower throughout most of this year. Since dropping below its 50-day moving average in February, the stock has not been able to move back above the trendline since. I look for that to remain the case for the next few months.
Buy to open the July18 $27-strike puts on GT at $1.50 or better. These options expire on July 20. The last two instances where the stochastics were in overbought territory and made a bearish crossover, the stock dropped over 12% from the high to the low each time. In the case of these options, we only need it to drop 10% for these options to double. I would suggest a target gain of 100% and a stop if the stock closes above its 50-day moving average.
— Rick Pendergraft
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