Stocks rallied again on Friday and that allowed the three main indices to post a second straight week of gains. The Russell did fall 1.41% on the week, but it led the way with a gain of 4.33% on Friday.
The Dow moved up 2.99% on Friday and the S&P was close behind with a gain of 2.68%. For the week the Nasdaq led the way with a gain of 6.09%, but on Friday the index only tacked on 1.38% and that was the smallest gain of the four.
All 10 of the main sectors moved higher on Friday and all gained at least 1.0% on the day.The energy sector was the biggest winner with a jump of 10.62%.
The financial sector also saw a big gain with a move of 5.27%, but the sector finished with a loss of 4.27% on the week and that was the worst performance of the 10.
The tech sector finished with the smallest gain at 1.33% and it barely beat out the communication services sector for that title.
The sector gained 1.36% on Friday.
My scans produced their seventh straight night of negative results with 34 bearish signals and four bullish signals.
The barometer moved up quite a bit as the huge readings from early last week lost some of their weighting. The final reading on Friday was -78.3 and that was up from -124.5.
Today’s trade idea is yet another bearish one as I got bearish signals on both the daily and monthly scans for Chewy Inc. (NYSE: CHWY). The company scores a 28 on the EPS rating scale and it doesn’t have an SMR because the company doesn’t have an ROE. The company has lost money in every quarter since it went public and it has a -5.2% profit margin.
The chart shows how Chewy has doubled from its March low and it is overbought at this time as a result of that rally. The pattern between Thursday and Friday got my attention. The stock spiked higher during the trading day on Thursday, but couldn’t hold the gain. It gapped lower on the open Friday and was never able to make it back to positive territory. This looks like a bearish scenario to me.
Buy to open the May 46-strike puts on CHWY at $5.00 or better. These options expire on May 15. With the option premiums and volatility high, I suggest a target gain of 75%. In order to reach our target gain, the stock will need to reach $37.25. The stock has been extremely volatile lately and I don’t see reaching our target as a problem. I recommend a stop at $45.50.
— Rick Pendergraft
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