Stocks opened higher on Tuesday, but the positive outlook didn’t last long. The indices all opened higher but started moving lower almost immediately. By midday the Dow and S&P had moved in to negative territory while the Nasdaq and Russell didn’t move in to negative territory until later in the day.
The Dow suffered the worst loss at 0.93% and the S&P was close behind at -0.84%. The Russell dropped 0.55% and the Nasdaq held up the best but still lost 0.39%.
[hana-code-insert name=’adsense-article’ /]Nine of the 10 sectors fell on Tuesday and five of them lost over one percent.The utilities sector suffered the biggest drop at 1.67% and the consumer staples sector was second with a loss of 1.63%.
The communication services sector was the only sector that managed to gain ground on the day with a move of 0.46%.
The tech sector finished as the second best performer with a decline of 0.34%.
My scans halted their string of positive readings at four on Tuesday.
There were 19 names on the bearish list and 11 names on the bullish side.
The barometer fell from 15.7 to 6.2 once these numbers were added in to the equation.
Even with the barometer falling, the trade setup that I liked the best was from the bullish list. TAL Education Group (NYSE: TAL) has the best fundamental ratings a company can get with a 99 on the EPS rating and an A on the SMR rating.
We see how the stock has been trending higher since last October and a trend channel has formed that connects the lows and the highs. The stock dropped down to the lower rail last week and has since inched up a little. We also see that the daily stochastic readings were in oversold territory and have just made a bullish crossover.
Buy to open the July 33-strike calls on TAL at $3.00 or better. These options expire on July 19. In order for these options to double the stock will need to reach $39.00. The stock peaked just above the $39 level back at the beginning of the month so it won’t have to break to a new high. I suggest a target gain of 100% with a stop at $33.
— Rick Pendergraft
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