All four of the main indices moved lower yesterday and there was a noticeable uptick in volume after the holiday. The Russell was the worst performer with a loss of 0.46% and it was followed by the Nasdaq with a loss of 0.23%. The S&P lost 0.17% and the Dow held up the best, but still notched a loss of 0.05%.
The sectors fared better than the indices with three moving higher and seven moving lower. The financial sector led the way with a gain of 0.55% and the utilities sector was the second best performer with a gain of 0.49%.
The scans continued their negative tone last night with 45 names on the bearish list and only nine on the bullish list.
The barometer was little changed with a reading of -46.4 after a reading of -46.7 on Friday.
Once again the lists were biased toward the bearish side, but it was a stock on the bullish list that caught my eye.
This time it was Altria Group (NYSE: MO) that garnered my attention. The company scores well with an 83 on the EPS rating and it gets a B in the SMR rating category.
Altria has formed a short-term trend channel over the last three and a half months and the stock has just hit the lower rail of that channel. The stochastics have just made a bullish crossover after hitting their lowest reading since late April and I think that is a great sign for the coming weeks.
Buy to open the Oct18 $57.50-strike calls on MO at $2.25 or better. These options expire on October 19. We only need for the stock to rise by 4.8% for these options to double and that would put the stock at $62. That area is also where the upper rail of the channel at this point in time. I suggest a target gain of 100% with a stop at $58.25.
— Rick Pendergraft
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