Friday marked the end of a volatile week with all four indices experiencing strong gains. We saw substantial losses on Monday, gains on Tuesday, huge losses on Wednesday, and mixed results on Thursday. In the end, all four indices lost ground for a third straight week.
As for Friday’s results, the Russell led the way with a gain of 2.19%. The Nasdaq tacked on 1.67%, the S&P moved up 1.44%, and the Dow gained 1.2%.
[hana-code-insert name=’adsense-article’ /]All 10 of the main sectors moved higher on the day and all but one gained over one percent.The utilities sector gained 0.52% and that was the biggest laggard among the sectors.
The industrial sector led the way with a gain of 1.93%.
Financials and materials tied for the second best performance with both sectors moving up 1.76%.
My scans turned in a second straight night of positive results on Friday and this time the skew was considerably greater.
There were 84 names on the bullish list compared to three on the bearish list.
The barometer jumped sharply with these stats and it moved in to positive territory. The final reading was 35.1 after a reading of -1.2 on Thursday.
Today’s trade idea is from the bullish list and the subject company is Chegg (NYSE: CHGG). The company has really strong fundamental ratings with a 99 on the EPS scale and an A on the SMR rating. The online education company has seen tremendous earnings and sales growth in recent years.
As you can on the chart above, Chegg has been in a solid upward trend for the past nine months. A trend channel has formed over the last four months and the stock just hit the lower rail of the channel. The stock is oversold based on the daily stochastic readings, but the indicators did make a bullish crossover on Friday.
Buy to open the October 40-strike calls on CHGG at $3.00 or better. These options expire on October 18. In order for these options to double the stock will need to reach $46.00. The upper rail is already above that price and the stock was above that price at the end of July. I suggest a target gain of 100% with a stop at $39.25.
— Rick Pendergraft
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