The rally from Monday was short-lived as stocks fell on Tuesday. All four of the main indices lost ground, but the Russell was far and away the worst performer with a loss of 0.88%. The Nasdaq dropped 0.45% as the second worst performer and it was followed by the Dow with a decline of 0.39%. The S&P held up the best and yet it was still down 0.28%.
Seven of the 10 sectors declined on Tuesday. The energy sector dropped 1.55% and that was the worst performance of the bunch. The consumer staples sector fell 1.03% and it was the only other sector to lose more than one percent.
[hana-code-insert name=’adsense-article’ /]The utilities sector gained 0.75% as the leading performer and it was followed by the healthcare sector with a gain of 0.57%.The consumer staples sector joined them in positive territory by adding 0.45%.
My scans were positively skewed again last night with 37 bullish signals and 10 names on the bearish list.
The barometer fell from 12.4 to 10.9 once the results were added in to the equation.
With the greater number of stocks to choose from on the bullish list, it was much easier to find a stock that I liked.
The scenario I found that I like the best was on Microchip Technology (Nasdaq: MCHP). The company scores an 88 on the EPS rating system and an A on the SMR rating.
In addition to the strong fundamentals, Microchip has been trending higher since October. The stock bottomed in October and then pulled back again in December, but unlike the market and most other stocks, it didn’t drop as low as it did in October. Connecting the lows from October and December creates a trend line and the stock just hit it.
Buy to open the July 80-strike calls on MCHP at $5.60 or better. These options expire on July 19. In order for these options to double the stock will need to reach $91.20. That price is slightly above the temporary highs the stock saw in February. I suggest a target gain of 100% with a stop at $79.50.
— Rick Pendergraft
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