Stocks rallied again on Monday with all four main indices experiencing substantial gains. The Nasdaq led the way with a gain of 1.35%. The S&P moved up 1.21% and the Russell tacked on 1.17%. The Dow lagged the other three and was the only one that finished with a gain under one percent, it was up 0.96%.
All 10 of the main sectors moved higher for a second straight session. This time the energy sector led the way with a gain of 2.21%. The communication services sector jumped 1.54% and the tech sector was close behind at 1.53%.
[hana-code-insert name=’adsense-article’ /]The utilities sector lagged once again with a gain of 0.60%.The materials sector had the second smallest gain at 0.78% and two other sectors (healthcare and industrials) failed to gain at least one percent.
My scans turned in a huge bullish skew on Monday with 203 names on the bullish list and only one on the bearish side—the iShares Silver Trust.
The barometer jumped from 35.1 to 109.9 as a result of the huge bullish list.
There were a number of stocks on the bullish list that I liked, but there were several factors that I had to consider.
With August options expiring on Friday, the October expirations were released on Monday for many stocks. This eliminated a few of the stocks where I liked the fundamentals and technical picture. The one stock I feel gives us the best risk/reward potential is Abbott Laboratories (NYSE: ABT). The company gets an 82 on the EPS rating and a B on the SMR rating.
The stock has been trending higher for the last four months within the confines of a trend channel. The stock just hit the lower rail of the channel last week and has since turned higher. The stochastic readings are interesting in that they did a double dip in the last few weeks and made a bullish crossover on Monday.
Buy to open the October 82.50-strike calls on ABT at $5.15 or better. These options expire on October 18. In order for these options to double the stock will need to reach $92.80. The stock will need to reach a new high to hit our target, but I think the fundamentals and the technicals support such a move. I suggest a target gain of 100% with a stop at $83.90.
— Rick Pendergraft
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