The March employment report that was released on Friday showed far greater job loss during the month than analysts were expecting. Stocks didn’t immediately drop at the open, but the losses started growing and the lows came in the early afternoon. There seemed to be some stabilization from there.
The Russell took the biggest loss of the bunch with a drop of 3.11%. The Dow dropped 1.69% as the second worst performer. The Nasdaq fell 1.53% and the S&P declined 1.51% to round out the losses.
Nine of the 10 main sectors fell on Friday while the consumer staples sector gained 0.78% as the only one on the plus side.The utilities sector took the biggest loss at 3.57% and it was the only one to drop more than 3%.
The materials sector dropped 2.38% and that was the second worst loss.
My scans turned in their sixth straight night of negative readings with 37 bearish signals and three bullish signals.
The barometer didn’t change much with a reading of -36.3 after a reading of -35.5 on Thursday.
Even though the daily scans were skewed to the negative side again, I have provided you with five straight bearish trade ideas and felt we needed some balance. The iShares MSCI China ETF (Nasdaq: MCHI) appeared on my weekly bullish scan and I like the way the chart is setting up.
We see that the ETF found support down at the $50 level a few weeks ago and it has since turned higher. The weekly stochastic indicators made a bullish crossover this past week and I think that is a good sign for the fund for the next few months.
Buy to open the May 55-strike calls on MCHI at $3.60 or better. These options expire on May 15. With higher option premiums and higher volatility, I suggest a target gain of 50% for this trade. In order to reach that target the fund will need to reach $60.40. I suggest a stop at $52.25.
— Rick Pendergraft
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