Stocks got hit with more selling on Friday and this time the losses were even greater than they were on Thursday. All four indices dropped at the open and all of them remained in negative territory throughout the day. They closed near their lows of the day.
The Nasdaq took the worst loss at 1.79%. The S&P and Russell were close with their results, dropping 1.05% and 1.03%, respectively. The Dow was the only one of the four that managed to contain its loss to less than 1.0%, but it still lost 0.78%.
Eight of the 10 main sectors dropped on Friday.The tech sector took the biggest hit at 2.24%.
The communication services sector and the consumer discretionary sector tied for the second worst performance with both losing 1.53%.
The consumer staples sector gained 0.17% to lead the way and the healthcare sector gained 0.06% as the only other sector on the positive side.
My scans produced their sixth straight negative result on Friday, but the difference wasn’t as bad as it has been in the last few days.
There were 25 names on the bearish list and 12 names on the bullish side.
The barometer moved up once these results were added in, but it remains in negative territory. The final reading on Friday was -35.1, up from -51.8 on Thursday.
Today’s trade idea is what I would call a cautious bullish trade. The company that is the subject of the idea is Johnson & Johnson (NYSE: JNJ). It is in the consumer staple sector and that gives it a little safety from further market declines. The company scores a 62 on its EPS rating and it gets an A in the SMR grading system.
Two things jumped out at me about Johnson & Johnson’s daily chart. First, the stock found support at the 50-day moving average over the last few days. It did the same thing back in mid-November before rallying over 10% in just over a month. We also see that the stochastic indicators are in oversold territory and made a bullish crossover. The last time they did that was in late October. That was the very beginning of the rally that continued for several months and saw the stock climb 16% in less than two months.
Buy to open the April 145-strike calls on JNJ at $7.00 or better. These options expire on April 17. In order for these options to double the stock will need to reach $159. The stock will need to break the high from earlier this month to reach their target, but as I explained above, the stochastic crossover and the support of the 50-day should help propel it higher. I suggest a target gain of 100% with a stop at $147.
— Rick Pendergraft
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