Stocks moved significantly lower for a fifth straight day on Friday, but this time the indices were able to make a comeback and finish with gains across the board. The Dow led the way with a gain of 0.44% and it was followed by the S&P which edged up 0.37%.
The Russell tacked on 0.19% and the Nasdaq lagged the others but still managed a gain of 0.08%. At the lows of the day, the indices were down over 1.5%.
[hana-code-insert name=’adsense-article’ /]All 10 sectors moved higher on Friday, but the gains had quite a spread.The utilities sector led the way with a gain of 1.79% and the materials sector was second best with a gain of 1.36%.
The consumer staples sector tacked on 1.22% and those were the only three that moved up over one percent.
The healthcare sector only managed a gain of 0.03% and that was the worst performance of the bunch.
The consumer discretionary sector moved up 0.15% and that was the second smallest gain.
My scans turned decidedly bullish on Friday after the big intraday reversal. There were 123 names on the bullish list and only two on the bearish list.
The barometer jumped back in to positive territory after such a bullish showing and the final reading was 43.7.
Given the size of the bullish list there were a number of charts that I liked. Ultimately I settled on a bullish trade idea on the Consumer Discretionary Select Sector SPDR (NYSE: XLY). I did look at the Tickeron AI Trend Prediction tool on this one and there was a bullish signal generated on Thursday and it had a confidence level of 77%. Previous predictions on the XLY have been accurate 94% of the time.
The thing that jumped out at me the most on the chart was how the XLY hit its 50-day moving average on Friday and then bounced back. If you look back to last August, the fund used the 50-day as support twice before moving higher. I look for a similar pattern this time around.
Buy to open the June $116-strike calls on XLY at $3.80 or better. These options expire on June 21. In order for these options to double the fund will need to reach $123.60. That price is above the all-time high, but it is only a 5.7% move from where the XLY closed on Friday. I suggest a target gain of 100% with a stop at $115.00.
— Rick Pendergraft
[hana-code-insert name=’oxford 1′ /]