Stocks rallied throughout the day on Monday and three of the four indices ended up in the black after all four started in the red. The Russell lost 0.26% and it was the only index that lost ground.
The Dow and Nasdaq led the way with matching gains of 0.11% while the S&P tacked on 0.05%. There were some reports that investors were once again concerned about the trade talks.
The sectors were mixed on the day with six moving higher and four moving lower. The consumer staples sector was the top performer with a gain of 0.52% while the communication services sector moved up 0.35% as the second best performer.
[hana-code-insert name=’adsense-article’ /]As for the stocks that lost ground, the energy sector was far and away the worst performer with a loss of 1.26%.The industrial sector fell 0.35% and the healthcare sector dropped 0.34% as the second and third worst performers.
My scans turned negative once again with 26 names on the bearish list and 16 names on the bullish side.
The barometer dropped back in to negative territory with a reading of -0.9.
All of the readings over the last four trading days have been in a range from -6.7 to +2.1.
Even though there were 42 names on the two lists combined, there were only two setups that I even considered. The one I found to offer the best risk/reward scenario was on the iShares China Large-Cap ETF (NYSE: FXI). The fund appeared on my bullish list and it received a bullish signal from the Tickeron Trend Prediction Engine on Friday. Past predictions from the prediction engine have been successful 78% of the time.
We see on the daily chart that the fund has been trending higher for just over three months and a trend line connects the lows from August, September, and last week. The FXI turned higher yesterday and moved back above its 50-day moving average. We also see that the daily stochastic readings were in oversold territory and made a bullish crossover.
Buy to open the January 40-strike calls on FXI at $1.75 or better. These options expire on January 17. In order for these options to double the fund will need to reach $43.50. The fund will only have to gain 5.4% from where it closed yesterday. I suggest a target gain of 100% with a stop at $40.50.
— Rick Pendergraft
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