The main indices were split down the middle yesterday with two finishing higher and two finishing lower. The Dow led the way with a gain of 0.61% and the S&P joined it in positive territory with a gain of 0.12%. The Russell was the worst performer of the bunch with a loss of 0.52% while the Nasdaq logged a more modest 0.08% loss.
The sectors had a slight bearish skew to their performance with six finishing lower on Wednesday while four finished higher. The utilities sector was by far the worst performer with a loss of 2.14%. The telecom sector was the second worst performer with a loss of 0.84%.
[hana-code-insert name=’adsense-article’ /]On the positive side, the financial sector led the way with a gain of 1.72% and the materials sector gained 1.07% as the second best performer.Those were the only two sectors that gained over one percent.
My scans were almost evenly split last night.
There were 22 names on the bullish list and 20 names on the bearish list.
The positive net reading of +2 was the first bullish skew in four days.
The barometer moved slightly higher from -14.6 to -11.1.
Today’s trade idea is a bullish one and it’s on one of the most widely followed stocks around. Facebook (Nasdaq: FB) has been trending lower since the end of July. The earnings report disappointed for new subscribers. Even with the disappointing results, the company still gets an EPS rating of 96 and an SMR rating of an A.
The stock has been under pressure, but it is still above the trendline that connects the lows from the last few years. The weekly stochastic readings are in oversold territory and are the lowest they have been in the last three and a half years. I look for the stock to rally in the coming weeks and based on the rallies this past spring and the one early in 2017, I see it being a move of at least 20 to 25% in the next few months.
Buy to open the November $160-strike calls on FB at $11.00 or better. These options expire on November 16. A similar rally to the ones mentioned above would put the stock in the $190 to $200 range and would make these options worth at least $30. I suggest a target of at least 100% on the first half. If you are so inclined, hold the second half to see if the stock does reach $190 and a gain of 172%. I would also suggest a stop at $157.
— Rick Pendergraft
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