It was another brutal day for stocks on Thursday as the three main indices all fell over 4% and the Russell dropped 3.54%. Fear about the number of coronavirus cases growing in the U.S. hit investors hard.
The Nasdaq took the biggest hit with a loss of 4.61%. The Dow and the S&P both fell 4.42%.
All 10 sectors dropped on Thursday and all saw huge losses. The two worst performances were energy and tech. The tech sector fell 5.39% and the energy sector dropped 5.35%.
The two smallest losses were in healthcare and industrials. Healthcare stocks declined 3.4% and industrials fell 3.71%.With so many stocks reaching oversold territory after the losses in the last few days, my scans turned more bullish on Thursday.
There were 34 names on the bullish list and not a single stock or equity ETF on the bearish list.
There were three bond ETFs on the bearish list, but they don’t factor in to the barometer.
The barometer moved in to positive territory on Thursday with a reading of 10.6. That’s the first positive reading since February 7.
There were a few setups that caught my eye on Thursday night, and obviously they were from the bullish list since there weren’t any stocks on the bearish list. The one that stood the most was Datadog (Nasdaq: DDOG). The company’s fundamental ratings are mixed with an EPS rating of 63 and an SMR reading of a D. What really got my attention was the chart.
Since debuting back in September, Datadog has seen some really big swings with an overall upward bias. A trend line connects the lows from October and December and that trend line appears to have acted as support yesterday. The stock closed up by 4.51% as the overall market was in a meltdown. I also like the fact that it had a bullish engulfing pattern yesterday.
When the stock hit its low in October, the stock gained over 60% in just over a month. When the stock hit its low in December, the stock gained over 50% in just over two months. In each case we saw a bullish crossover from the stochastic indicators at the beginning of the rally.
Buy to open the April 44-strike calls on DDOG at $6.00 or better. These options expire on April 17. In order for these options to double the stock will need to reach $56.00. This would mean an increase of 22% from where the stock closed on Thursday, but given the past rallies I think it is doable. I suggest a target gain of 100% with a stop at $41.90.
— Rick Pendergraft
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