Friday saw a mix in the index performances as three moved higher and one moved lower. The Nasdaq was the lone losing sector on the day with a loss of 0.15%. The Dow led the way with a gain of 0.49% while the S&P and Russell had matching gains of 0.22%.
The sectors were mixed as well with six moving higher and four moving lower. The best performance on the day was the utilities sector with a gain of 1.54%.
[hana-code-insert name=’adsense-article’ /]The materials sector and the healthcare sector tied for the second best performance with gains of 1.01%.On the negative side, the communication services sector suffered the worst loss at 0.49% and it was followed by the consumer discretionary sector with a loss of 0.39%.
My scans remained bullishly skewed on Friday night with 51 names on the bullish side of the ledger and nine on the bearish side.
The barometer jumped to 37.4 as a result of the bullish slant.
There were several names on the bullish list that are part of the energy sector, both stocks and ETFs. In fact, 22 of the 51 bullish signals were tied to the sector.
One of those names was the Energy Select Sector SPDR (NYSE: XLE). Much has been made of oil’s drop in the last few weeks and the 12 straight down days was a record.
What caught my eye about the XLE’s chart was the double-bottom pattern with the fund dropping down to the $65 area a couple of weeks apart, but not closing below it. I look for the fund to bounce back over the next month and for the double-bottom to be confirmed, the fund will need to push past the high between the two lows.
Buy to open the January 2019 $66-strike calls on XLE at $3.35 or better. These options expire on January 18. For these options to double, the fund will need to reach $72.70. That is only 8.2% above Friday’s closing price, so that target doesn’t seem unreasonable. The fund will have to move back above the 50-day moving average to get to the target, so keep an eye on how it responds to the possible resistance. I suggest a target gain of 100% with a stop at $65.50.
— Rick Pendergraft
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