After the massive selloff on Thursday, Friday’s session was rather volatile, but it ended with all four of the main indices posting solid gains. The indices gapped higher out of the gate, but then sold off during the middle of the day. Three of the four fell in to negative territory in the afternoon before rallying in to the close.
The Russell led the way with a gain of 2.32% and it was followed by the Dow with a gain of 1.9%. The Dow was the only index that didn’t fall in to the red in the afternoon.
The S&P logged a gain of 1.31% and the Nasdaq moved up 1.01%.Nine of the 10 sectors gained ground on Friday with utilities being the only group to close with a loss.
The sector fell 0.22% on the day.
The financial sector led the way with a gain of 3.03% and it was followed by the energy sector with a gain of 2.52%.
Five of the 10 sectors experienced gains of at least 1.0% or more.
My scans results from Friday night dropped off considerably. There weren’t any bullish signals and there were only seven bearish signals.
With a more neutral reading, the barometer continued to climb from the extreme lows it hit early last week. The final reading on Friday was -26.9 and that was up from -49.9.
There were a few stocks on the bearish list that got my attention, but I didn’t like the way the options were priced. Instead I went to my weekly scans to find a setup that I liked better. C.H. Robinson Worldwide (Nasdaq: CHRW) appeared on the weekly bearish scan and the company scores a 36 on the EPS rating system and a C on the SMR grading scale.
Looking at the weekly chart we see that the stock has been trending lower since mid-2018 and if we connect the highs from 2018 and 2019 we get a trend line that the stock just hit. The stock is overbought based on the weekly stochastic indicators, but the indicators made a bearish crossover last week. I look for the stock to continue lower over the next few months.
Buy to open the August 80-strike puts on CHRW at $6.20 or better. These options expire on August 21. I suggest a target gain of 100% and that means the stock will need to drop to $67.60. The stock was trading all the way down near $57 at the March low, so it won’t have to get anywhere near that level for these options to double. I recommend a stop at $81.00.
— Rick Pendergraft
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