Stocks rallied on Tuesday after a couple of straight days of losses. All four major indices moved higher on the day with the Russell leading the way with a gain of 1.33%. The Nasdaq also notched a gain over one percent by adding 1.08%. The S&P moved up 0.85% and the Dow rounded out the gains with a move of 0.77%.
Nine of the 10 sectors moved higher on the day with the consumer staples sector slipping 0.23% as the only one in the red. The smallest gain was the utilities sector at 0.14%.
[hana-code-insert name=’adsense-article’ /]The materials sector (+1.50%) led a group of five that gained over one percent on the day.The tech sector tacked on 1.24% as the second best performer and the industrial sector gained 1.19% as the third best performer.
My scans flipped back to a positive reading on Tuesday with 25 names on the bullish list and 17 on the bearish list.
Despite the positive reading, the barometer fell again as the huge reading from last Thursday continued to dwindle in its importance.
The final reading was 12.4, down from 24.5.
There weren’t a great number of stocks that jumped out at me on either list last night, but the one stock that I liked the best was American Eagle Outfitters (NYSE: AEO). The stock appeared on the bullish list and has decent fundamental ratings. The EPS rating is an 82 and the SMR rating is a B.
The weekly chart did a better job of showing the upward trend the stock has been in for the last few years. Connecting the low from the third quarter of 2017 with the low from December creates a trend line that is in close proximity to the 104-week moving average. I look for the trend line and the moving average to work as support going forward.
Buy to open the July 18-strike calls on AEO at $2.80 or better. These options expire on July 19. In order for these options to double the stock will need to reach $23.60. That price is below the recent high of $24.30 so I think the stock can get there in the next few months. The company is set to release earnings on June 5, so you will want to keep an eye on that report. I suggest a target gain of 100% with a stop at $18.50.
— Rick Pendergraft
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