Stocks extended their winning streak on Monday and for the main three indices that is five straight days of gains. The Nasdaq led the way again with a gain of 1.05%, but it was the only one to gain over one percent. The Russell moved up 0.60% as the second best performer and it was followed by the S&P with a gain of 0.47%. The Dow lagged the other three, but it still gained 0.30%.
Just like Friday, eight of the 10 sectors moved higher on Monday. The utilities sector lost ground again and finished with a decline of 0.67%. The communication services sector dropped 0.05% as the only other sector in the red.
The financial sector tacked on 0.85% as the second best performing sector and the consumer discretionary sector was close behind with a gain of 0.84%.
The indices finished near the lows of the day and that helped the bearish scan last night.
There were a total of 73 stocks on the bearish list and only six on the bullish list.
Once those totals were added in to the equation, the barometer dropped sharply once again and this time it moved in to negative territory.
The indicator fell from 10.3 to -30.5.
Even though there were a great number of stocks on the bearish list, there weren’t that many where I liked the setup. The one that jumped out the most was Allegheny Technologies (NYSE: ATI). The steel company doesn’t have very good fundamental measurements with an EPS rating of 18 and an SMR rating of a C.
We see on the chart that Allegheny has been trending lower since late February. A trend channel has formed with the upper rail connecting the highs from February and April. The 50-day moving average is in the same area as the upper rail and that means two layers of resistance.
Buy to open the July 25-strike puts on ATI at $1.90 or better. These options expire on July 19. In order for these options to double the stock will need to drop to $21.20. The low at the end of May was $21.15, so the stock won’t have to break through that potential support. I suggest a target gain of 100% with a stop at $24.60.
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