The selling that hit stocks on Tuesday afternoon carried over in to Wednesday and that sent all four of the main indices lower. The Russell suffered the worst loss at 0.94% and it was followed closely by the Dow with a drop of 0.87%. The Nasdaq fell 0.79% and the S&P declined 0.69%.
Nine of the 10 sectors fell again on Wednesday with the materials sector being the lone one to gain ground and it only gained 0.02%. The smallest loss among the others was 0.19% and that was the financial sector.
[hana-code-insert name=’adsense-article’ /]The utilities sector was once again the worst performer with a loss of 1.33%.The communication services sector fell 0.98% as the second worst performer and the healthcare sector dropped 0.96% as the third worst.
My scans surprised me last night with 72 names on the bullish side and only nine on the bearish side.
The fact that the discrepancy was so skewed to the bullish side is indicative of how many stocks are in oversold territory on their daily charts.
The barometer jumped from 6.2 to 26.7 once the results from Wednesday were added to the equation.
The lists were interesting last night as there were quite a few of the stocks on the bearish list that had really strong fundamental ratings and that made it difficult to pick one of them. Instead I have another bullish trade idea for you today. Discover Financial Services (NYSE: DFS) was on the bullish list and he had strong fundamental ratings. The company scores an 87 on the EPS rating and an A on the SMR.
Looking at the chart we see that the stock has remained above its 50-day moving average as the rest of the market has been falling. The stock appears to be using the moving average as support. The stochastic readings are in oversold territory and made a bullish crossover yesterday. I look for the stock to rally in the coming months like it did after the late March pullback.
Buy to open the July 75-strike calls on DFS at $3.70 or better. These options expire on July 19. In order for these options to double the stock will need to reach $82.40. The stock peaked just above $82 at the beginning of the month, so it will need to move slightly above that recent high. I suggest a target gain of 100% with a stop at $74.90.
— Rick Pendergraft
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