The winning streak for the indices continued on Wednesday as all four moved higher yet again. For the Nasdaq the streak has reached six days and for the S&P it has reached four days. The Dow is also at four straight days of gains, but the Russell is only at three.
The Russell has led the indices for its three straight gains, tacking on another 1.92% yesterday. The Dow got a boost from Disney and logged a gain of 1.39% on the day. The S&P moved up 0.64% and the Nasdaq edged up 0.52%.
Seven of the 10 sectors moved higher on the day with four gaining over 1.0%. The industrial sector led the way with a gain of 1.91%.Materials were the second best performer with a move of 1.46%.
As for the sectors that moved lower, the defensive sectors were the worst performers. Utilities fell 1.28% and consumer staples dropped 0.21%.
The communication services sector lost 0.15% as the third sector in the red.
My scans turned in a second straight positive reading last night, but the lists remained relatively balanced. There were 31 bullish signals and 21 bearish signals.
The barometer moved higher again, but remained in negative territory by a small margin. The final reading last night was -1.2 after a reading of -10.2 on Tuesday.
Once again there wasn’t a single bearish trade setup that I felt gave us a good risk/reward relationship, so today’s trade idea is a third straight bullish one. Morgan Stanley (NYSE: MS) was on the bullish list and the company’s fundamental ratings are strong with an EPS rating of 92 and an SMR rating of a B.
The daily chart shows how the stock has been trending higher since bottoming in March with a trend line connecting that low with the low in May. The stock recently dropped down to that trend line and has since curled higher.
Buy to open the October 47-strike calls on MS at $4.80 or better. These options expire on October 16. I suggest a target gain of 75% for the trade and that means the stock will need to reach $55.40. The stock was above $56 back in January, so the stock won’t have to break to a new 52-week high to reach our target. I suggest a stop at $47.00.
— Rick Pendergraft
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