Stocks bounced back on Thursday after losses for the majority of the indices on Wednesday. Another 3.2 million people filed for unemployment benefits in the past week and that was slightly higher than the consensus estimate. This morning we will get the April employment report and the consensus estimate is for a drop of 21.3 million jobs during the month and an unemployment rate of 16.2%.
The Russell led the main indices with a gain of 1.58% and it was followed by the Nasdaq which jumped 1.41%. The S&P moved up 1.15% and the Dow notched a gain of 0.89%.
Eight of the 10 sectors moved higher on Thursday and the bottom two from Wednesday were the top two yesterday.The energy sector gained 2.6% and the financial sector tacked on 2.35%.
Seven of the eight that moved higher gained at least 1.0%.
The consumer staples sector fell 0.28% and the healthcare sector fell a whopping 0.01%.
My scans moved to a more positive stance with 48 bullish signals and six bearish signals.
The barometer continued to climb and finished with a reading of 26 on the day, up from 1.1 the night before.
With the abundance of stocks on the bullish list compared to those on the bearish list, today’s trade idea is a bullish one. Vipshop Holdings (NYSE: VIPS) was on the bullish list and the company has great fundamental ratings. The EPS rating is a 95 and the SMR rating is an A.
We see on the daily chart that a trend channel has formed since the beginning of the year and the stock just bounced off of the lower rail. The daily stochastic indicators hit oversold territory for the first time since the end of February and made a bullish crossover last night. When the indicators did the same thing a few months back, the stock jumped over 50%. The stock dipped down close to what is now the lower rail of the channel in mid-March and then rallied over 50% again.
Buy to open the June 13-strike calls on VIPS at $2.85 or better. These options expire on June 19. I suggest a target gain of 100% for this trade and for these options to double the stock will need to reach $18.70. The stock peaked at $18.95 in April, so the stock won’t have to break to a new high to reach our target. I suggest a stop $14.00.
— Rick Pendergraft