Stocks took a pretty good ride on Thursday. All four indices opened lower and turned much lower in the morning session. Eventually they would all rally and three of the four would end up in positive territory.
The Dow led the way with a gain of 0.43% and it was followed by the S&P with a move of 0.31%. The Nasdaq tacked on 0.26%. The Russell was the only index of the four that didn’t make it back to positive territory and it ended up with a loss of only 0.06%.
The sectors were split on the day with six moving higher and four moving lower.The financial sector was the top performer with a gain of 1.26%.
The consumer staples sector tacked on 1.19% as the only other sector to gain more than 1.0%.
Facebook fell over 6% on Thursday and that caused the communication services sector to drop 1.01% on the day.
The healthcare sector fell 0.73% and that was the second worst performance.
With the big reversal, my scans grew even more positive last night.
There were 118 names on the bullish list and only four names on the bearish list.
The barometer jumped to 64.6 from 24.9 once these results were added in to the equation. This is the highest reading on the barometer since the market bottom in October.
Given the strong signal from the barometer, I thought a trade that plays the overall market might be our best bet. There were several ETFs on the bullish list, but the setup I liked the best was on the iShares MSCI ACWI ETF (Nasdaq: ACWI). The ACWI stands for All Country World Index and it includes stocks from developed markets as well as emerging market stocks.
We see that the fund has been trending higher over the last four months within the confines of a trend channel. The current low is actually only the second time touching the lower rail with the upper rail defining the trend’s angle. We see that the stochastic indicators are the lowest they have been since the channel started and they made a bullish crossover last night.
Buy to open the March 78-strike calls on ACWI at $2.80 or better. These options expire on March 20. In order for these options to double the fund will need to reach $83.60.The fund will have to break to a new high, but I think it can do it based on the bounces in October and December. I suggest a target gain of 100% with a stop at $78.00.
— Rick Pendergraft
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