All four indices moved higher on Wednesday, but it was a clear-cut risk on day as the Nasdaq and the Russell both spent a considerable amount of time in negative territory throughout the day. Those two indices would lag the other two with gains of 0.24% and 0.18%, respectively.
The Dow led the way with a gain of 0.62% and the S&P was close behind with a gain of 0.57%.
Eight of the 10 sectors moved higher while one moved lower and one was unchanged. The financial sector was the unchanged one and the energy sector dropped 1.23% as the only one in the red.
The utilities sector jumped 1.54% and the materials sector tacked on 1.16% as the top performers.
My scans remained negative with 34 bearish signals and six bullish signals on Wednesday night.The barometer actually moved higher because the discrepancy between the two lists wasn’t as great as it had been in recent days. The final reading was -55.4, up from -66.1.
After four straight bearish trade ideas I felt like we needed a bullish trade in the mix.
Even though there only six signals to choose from, I found one that I like on Bank of New York Mellon (NYSE: BK). Of course the stock was on the bullish list, and it has good fundamental ratings with an EPS rating of 79 and an SMR rating of a B.
We see on the daily chart how the stock has been trending higher over the last four months and how a trend channel has formed to define the different cycles. The stock is at the lower rail currently and the daily stochastic indicators are in oversold territory. The indicators did make a bullish crossover last night. I look for the stock to rally in the next few weeks.
Buy to open the September 35-strike calls on BK at $2.65 or better. These options expire on September 18. I suggest a target gain of 100% for this trade and that means the stock will need to reach $40.30. The stock was up at the $43 level in early June. I recommend a stop at $34.50.
— Rick Pendergraft
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