I expected the volatility from last week to carry over to this week, but I didn’t know we were going to see the opposite of what we saw on Friday. Stocks opened sharply lower, but rallied back and all four indices finished in the black. Friday saw stocks open higher and then dip in to negative territory until a late rally allowed the indices to post gains.
The Russell led the way for a second straight day, this time with a gain of 2.3%. The Nasdaq moved up 1.43% on the day and it was the first one to move in to positive territory around lunchtime.
The S&P tacked on 0.83% and the Dow lagged the others with a gain of 0.62%.This was different from how the indices have performed in recent weeks as the Russell and the Dow seemed to be moving together more so than the Dow and S&P.
All 10 sectors moved higher on Monday with the communication services sector leading the way with a gain of 1.61%.
The financial sector jumped 1.38% and that was the second best performance. In all four sectors gained over 1.0% and three others gained over 0.9%.
The healthcare sector experienced the smallest gain at 0.23% and it was followed by the energy sector which only gained 0.30%. The utilities sector (0.68%) was the only other one that failed to gain at least 0.9%.
My scans were dead even on Monday with six bullish signals and six bearish signals. The result was the first one since May 18 that wasn’t skewed to the bearish side.
The barometer continued its climb with a reading of -10.3 after a reading of -26.9 on Friday.
After four straight bearish trade ideas and thanks to having some stocks on the bullish list, I have a bullish trade idea for you today. Darden Restaurants (NYSE: DRI) was on the bullish list and the company has some great fundamental ratings. The EPS rating is a 93 and the SMR rating is an A.
The daily chart shows how the stock has been trending higher within a trend channel since its March low. The stock jumped over 85% from early April to the end of April, and it jumped 50% from the mid-May low to the high in early June. The stochastic indicators made bullish crossovers at the beginning of both of those rallies and they made one last night.
Buy to open the July 70-strike calls on DRI at $10.82 or better. These options expire on July 17. I suggest a target gain of 75% on this trade and that means the stock will need to reach $88.90 in order to hit our target. The August options aren’t available yet and the next series was out to October. I suggest a stop at $70.50.
— Rick Pendergraft
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