Wednesday was a pretty lackluster day with the indices not venturing very far in either direction. Three of the four would end the day with small losses while the Russell managed to notch a gain of 0.13%.
The S&P fell 0.11% and that was the worst loss of the day. The Dow dropped 0.10% and the Nasdaq lost 0.07%.
[hana-code-insert name=’adsense-article’ /]Six of the 10 sectors lost ground on the day with the materials sector taking the worst loss at 0.60%.The consumer staples sector declined 0.32% and that was the second worst performer among the sectors.
Healthcare stocks led the way with a gain of 0.22% and the energy sector was a close second with a move of 0.20%.
My scans turned a little more negative last night with 37 names on the bearish list and nine names on the bullish list.
The barometer dropped from 21.5 to an even 0 when I added these results in.
I had a hard time deciding between two possible trade ideas for today, but in the end it was a bullish position on Southwest Airlines (NYSE: LUV) that I felt gave us the best chance at success. The company has solid fundamental ratings with an 83 on the EPS rating scale and a B on the SMR rating system.
We see that the stock has been trending higher since August with the lows from October helping form the lower rail of a channel. The highs from October and November define the upper rail. The stock is right at the lower rail at this time and the stochastic readings are in oversold territory. The indicators did make a bullish crossover yesterday.
Buy to open the January 52.50-strike calls on LUV at $3.20 or better. These options expire on January 17. In order for these options to double the stock will need to reach $58.90. The stock peaked at $58.31 back in November so it will need to break through that potential resistance to reach our target. I suggest a target gain of 100% with a stop at $54.25.
— Rick Pendergraft
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