The indices were mixed on Friday with three of the four finishing in positive territory after the July jobs report was a little better than expected. The Russell was the top performer on the day with a gain of 1.59% and it was the only one in positive territory for the entire day.
The Dow and S&P were in negative territory for most of the day and then moved in to positive territory at the very end of the day. The Dow would end up with a gain of 0.17% while the S&P inched up 0.06%.
The Nasdaq fell 0.87% on Friday and that snapped the winning streak at seven days.Eight of the 10 sectors moved higher on the day with financials leading the way with a gain of 2.14%.
The utilities sector jumped 1.8% and the industrial sector tacked on 1.71%.
Those were the only three sectors that gained over 1.0%.
The tech sector fell 1.49% as the worst performer and the communication services sector dropped 0.12%.
Those were the only two sectors to lose ground on the day.
My scans turned decidedly more bearish on Friday with 64 bearish signals and 11 bullish signals.
The barometer dropped quite a bit once these figures were added in to equation, falling from -7.6 to -27.7.
There was only one stock on the bullish list that I even considered for today’s trade idea, but in the end it was a bearish idea that I felt gave better odds. Elanco Animal Health (NYSE: ELAN) appeared on the bearish list last night and the company’s fundamental ratings are average with an EPS rating of 45 and an SMR rating of a C.
We see on the chart that the stock has struggled in the $25.50 to $25.75 range. The stock stalled there in April and now it has stalled there again. The daily stochastic indicators are in overbought territory and made a bearish crossover on Friday. The RSI had hit overbought territory in the last few days and has fallen since then.
Buy to open the October 27-strike puts on ELAN at $3.50 or better. These options expire on October 16. I suggest a target gain of 75% and that means the stock will need to drop to $20.87. The low in July was $20.85 so it won’t have to break below that to hit our target. I recommend a stop at $26.00.
— Rick Pendergraft
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