The tone for Monday’s trading was one of little commitment. The indices were mixed with three moving lower and one moving higher, but none of the moves were very big. With the Veteran’s Day holiday, the bond markets were closed and the volume on the stock market was lower than usual.
The Dow was the lone index that moved higher, but by only 0.04%. The Russell was the worst performer with a loss of 0.37%. The S&P dropped 0.20% and the Nasdaq fell 0.13%.
[hana-code-insert name=’adsense-article’ /]Eight of the 10 main sectors moved lower on the day.The two that moved up were the industrial sector and the tech sector and they had matching 0.05% gains.
The utilities sector was the worst performer once again and that is the third straight day it took that distinction and six of the last seven trading days.
Monday’s decline was 0.66%.
The energy sector was the second worst performer with a drop of 0.58%.
My scans were bearish once again on Monday with 21 names on the bearish list and 18 on the bullish list.
This makes six straight sessions with a negative skew.
The barometer inched up slightly with the difference being so small. The final reading on Monday was -24.7, up from -37.6 on Friday.
Even though there were only 18 stocks on the bullish list, there was somewhat of a theme in them. There were seven stocks that were either from the real estate sector or the home construction industry. The one that impressed me the most was Lennar (NYSE: LEN). The company gets a 64 on its EPS rating and an A in the SMR rating system.
We see on the daily chart that the stock pulled back to its 50-day moving average and has since bounced a little. The daily stochastic readings are in oversold territory and just made a bullish crossover last night.
Buy to open the December 57.50-strike calls on LEN at $2.90 or better. These options expire on December 20. In order for these options to double the stock will need to reach $63.30. That is slightly above the recent high, but I think the stock can get there. I suggest a target gain of 100% with a stop at $$57.40.
— Rick Pendergraft
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