Stocks were hit hard again on Wednesday and this time the losses were there from the very beginning. There were some poor economic reports from Europe that had futures lower before our markets even opened and the losses steepened throughout the morning. The market seemed to stabilize around midday, but it wasn’t enough to avoid significant losses across the board.
The indices were all down sharply again, but the losses were much worse at the lows of the day. The three main indices were all down over 2% at the lows of the day with the Russell holding up a little better.
[hana-code-insert name=’adsense-article’ /]In the end, the Russell fell the least at 0.92% and it was the only one that didn’t lose at least 1%.The Dow took the worst loss at 1.86% and the S&P dropped 1.79%.
The Nasdaq declined 1.56%.
All 1o main sectors lost ground for a second straight day and all were down over 1%.
The worst loss of the day was the energy sector at –2.46%.
The financial sector fell 2.04% and the consumer staples sector dropped 2.01%.
These were the only three that fell more than 2.0%.
The utilities sector fell the least for a second straight day, but it still dropped 1.33%. The healthcare sector took the second smallest loss at 1.46%.
Surprisingly my scans were positive last night with 31 names on the bullish list and only seven on the bearish list. With the selling we have seen over the last few weeks, there are very few stocks in overbought territory and quite a few in oversold territory. This is obviously having an impact on the scans at this point.
The barometer inched up to 16.3 from 12.4 once these results were included in the calculations.
Given the great number of stocks in oversold territory and the greater number of stocks to choose from on the bullish list, today’s trade idea is a bullish one. The company is Lattice Semiconductor (Nasdaq: LSCC) and it has mixed fundamental indicators. The EPS rating is the best you can get at 99, but the SMR rating is only a C. The company hasn’t been able to grow sales the same way it has been able to grow earnings.
Looking at the chart we see that a trend channel has formed over the last eight months and the stock is close to the lower rail at this time. The stochastic indicators made a bullish crossover last night and the last few instances of that happening has been a good sign for the stock.
The company is scheduled to report earnings on October 25 so you will want to keep an eye on that. It is worth noting that the gaps higher in July, April, and February were all the results of earnings reports.
Buy to open the November 17.50-strike calls on LSCC at $2.15 or better. These options expire on November 15. In order for these options to double the stock will need to reach $21.80. That target is slightly above the September high, but the upper rail will be well above that price in a few weeks. I suggest a target gain of 100% with a stop at $17.00.
— Rick Pendergraft
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