Stocks moved higher for a second straight day on Wednesday, but the gains were far more modest than they were on Tuesday. Three of the four main indices moved higher with the Russell falling 0.25% as the only one in the red. The S&P and Dow tied for the best performance with both gaining 0.82%. The Nasdaq tacked on 0.64% as the third best performance.
Nine of the 10 sectors moved higher on Wednesday. The energy sector was the only one in the red with a loss of 0.99%.
[hana-code-insert name=’adsense-article’ /]The utilities sector led the way with a gain of 2.14%.With investors starting to think the Fed may cut rates in the near future, the dividend yielding utilities have become more attractive.
The tech sector gained 1.33% as the second best performer while the consumer staples sector added 1.23% as the third best performer.
These were the only three sectors to gain over one percent.
My scans remained skewed to the bullish side, but the difference between the two lists dropped drastically last night.
There were 25 names on the bullish list and seven on the bearish list.
After the huge reading on Tuesday, the barometer fell to 68.6 on Wednesday.
Despite the bullish skew to the scans, I wanted to keep some balance to the trade ideas. Therefore I have a bearish trade idea on the iShares MSCI Brazil Capped ETF (NYSE: EWZ) for you today. The chart was the main driver to the trade, but there was also a bearish signal generated by the Tickeron Trend Prediction Engine. The signal showed a confidence level of 88% and 91% of previous predictions on the EWZ have been successful.
We see on the chart that a trend line connects the highs from January 31 and March 19. The fund just hit the trend line on Tuesday and then fell sharply on Wednesday. The oscillators had reached overbought territory until the drop yesterday. The decline did cause the stochastic readings to make a bearish crossover.
Buy to open the July 43-strike puts on EWZ at $2.90 or better. These options expire on July 19. In order for these options to double the ETF will need to drop to $37.20. The most recent low was at $36.70 so the fund won’t have to break to a new low for these options to double. I suggest a target gain of 100% with a stop at $42.60.
— Rick Pendergraft
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