Stocks soared on Tuesday as investors returned after the Monday holiday. The optimism seemed to be buoyed by optimistic results from a couple of different COVID-19 vaccines.
All four indices gained ground on the day, but they did close off of their highs. The Russell led the way with a gain of 2.77% and it was followed by the Dow with a gain of 2.17%.
Eight of the 10 sectors posted gains on the day while tech and healthcare were the only two that lost ground.
The healthcare sector dropped 0.18% and the tech sector fell 0.10%.
The financial sector posted a monster gain of 5.2% to lead the way and the industrial sector jumped 4.2% as the second best performer. Energy gained 2.78% and the materials sector gained 2.74%.
My scans continued to turn more negative with 88 bearish signals and nine bullish signals on Tuesday.
The barometer dropped to -60.4 from -42.1 once these results were added in.
Given the huge discrepancy between the two lists, I found far more bearish setups that liked than bullish ones. The one I felt gave us the best odds of success was on Bluebird Bio Inc. (Nasdaq: BLUE). The stock was on the bearish list and its fundamental scores are terrible. The EPS rating is a 12 and the SMR rating is an E.
The daily chart shows the steep descent for the stock. It was trading above $140 last July and it was above $235 in 2018. It’s now struggling to get back above the $70 level. The highs over the last year connect to form a downward sloped trend line and the stock hit that trend line last week. The stock dropped sharply yesterday as the resistance seemed to hold.
Buy to open the July 70-strike puts on BLUE at $11.70 or better. These options expire on July 17. I suggest a target gain of 70% which means the stock will need to drop down to the $50 area. The low on May 1 was right in this area, so the stock won’t have to break to the March low to hit our target. I recommend a stop at $70.50.
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