Black Friday was not a great day for stocks as three of the four main indices fell on the day. The Russell managed a tiny gain of 00.03%, but the other three suffered significant losses. The Dow dropped 0.73% for the worst performance and it was followed by the S&P with a loss of 0.66%. The Nasdaq fared a little better, but still lost 0.48% on the day.
Seven of the main sectors fell on Friday, but the energy sector really stood out with a drop of 3.14%.
[hana-code-insert name=’adsense-article’ /]The only other two sectors that lost more than one percent were communication services (-1.31%) and materials (-1.08%).The three sectors that gained ground on Friday were the usual suspects in terms of defensive ones.
The consumer staples sector led the way with a gain of 0.35% while healthcare (+0.15%) and utilities (+0.06%) notched smaller gains.
My scans turned decidedly more bullish on Friday with 85 names on the bullish side of the docket and only seven on the bearish side.
These results caused the barometer to jump from -2.6 to +27.2.
One of the stocks on the bullish list really jumped out to me and it was Discovery, Inc. (Nasdaq: DISCA). The media company scores a 76 on Investor’s Business Daily’s EPS rating system and it scores an A in the SMR category.
We see on the chart how Discovery has been cycling higher over the last six months and a trend channel has formed. This isn’t the cleanest channel we have seen, but it is an upwardly sloped channel never the less. The stock just hit the lower rail of the channel and the daily stochastic readings made a bullish crossover on Friday.
Buy to open the January 2019 $30-strike calls on DISCA at $2.25 or better. These options expire on January 18. The stock will need to reach $34.50 for these options to double and that is below the upper rail of the channel. I suggest a target gain of 100% with a stop at $29.50.
— Rick Pendergraft
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