The market screamed higher on Tuesday, but there wasn’t really anything in particular that sparked the buying except the fact that so many stocks were oversold. There was some Fed speak about a possible interest rate cut, but Chairman Powell and James Bullard didn’t exactly sound like they were ready to pull the trigger next week.
All four of the main indices jumped sharply on the day and all ended up with gains over two percent. The Nasdaq led the way with a gain of 2.65% and the Russell was right behind at 2.59. The S&P tacked on 2.14% and the Dow added 2.06%.
[hana-code-insert name=’adsense-article’ /]All 10 sectors moved higher on the day, but the tech sector really stood out.After getting hit hard yesterday, the sector gained 3.28%.
The materials sector finished with the second best gain at 2.94%.
All told, there were six sectors that gained over two percent and all but two gained over one percent.
The two sectors that failed to gain over one percent were the utilities sector (+0.08%) and the consumer staples sector (+0.89%).
My scans turned decidedly bullish after the big rally.
There were 139 names on the bullish list and only one on the bearish list.
The barometer jumped to 93.5 once the results were added in and that is the highest reading since December 28.
Obviously with the sheer number of stocks to choose from, today’s trade idea comes from the bullish list. There were a number of stocks that stood out, but the one that stood out most was Twitter (NYSE: TWTR). The company scores a 99 on the EPS rating system and an A on the SMR rating.
The daily chart shows how Twitter has been moving higher since the December low. A trend line connects the low closes from December and March. The stock just hit that trend line on Monday and bounced sharply higher after that. We also see that the oscillators were in oversold territory and have now moved up.
Buy to open the July 35-strike calls on TWTR at $2.65 or better. These options expire on July 19. In order for these options to double the stock needs to reach $40.30. The recent high was up at $41, so the stock won’t have to break to a new high for the options to double. I suggest a target gain of 100% with a stop at $35.
— Rick Pendergraft
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