Stocks reversed their fortunes from Friday and posted huge gains on Monday as the number of cases of the COVID-19 virus seems to be tapering off. All four of the main indices experienced huge jumps.
The Russell was the top performer with a gain of 8.24% and it was the only that gained over 8.0%. The Dow jumped 7.73% and that was good enough for second place. The Nasdaq gained 7.33% and the S&P tacked on 7.03%.
All 10 main sectors saw pretty significant gains.The tech sector topped the list with a gain of 8.53% and the consumer discretionary sector gained 8.32%.
Those were the only two that gained more than 8%, but there were three others that topped 7%.
The smallest gain came from the consumer staples sector, but it was still a move of 3.72%.
The healthcare sector jumped 5.24% and that was the second smallest gain.
My scans turned positive after the huge rally on Monday. There were 63 bullish signals generated and only seven bearish signals.
The barometer jumped from -36.3 to +2.1 after these results were added in to the equation. This halted a stretch of four days of negative readings.
With the huge discrepancy between the two lists last night, it gave me a chance to look for another bullish trade idea for today. New Oriental Education & Technology (NYSE: EDU) was one of the stocks on the list and the company scores a 98 on the EPS rating scale and an A on the SMR grading system.
What jumped out at me on the chart was how the stock dropped below the $105 level twice in the last few weeks, but on the first go round it rallied sharply. The second dip didn’t go quite as low and it looks like the stock is setting up for another sharp rally. I am a little concerned that the stock may find resistance at the 50-day, but we should be able to reach our target even if it does.
Buy to open the May 110-strike calls on EDU at $9.50 or better. These options expire on May 15. With the option premiums and volatility high, I suggest a target gain of 50%. This means the stock will need to reach $125.20. I suggest a stop at $102.50.
— Rick Pendergraft
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