Stocks were mixed on Monday with three of the four indices moving higher and six out of 10 sectors moving higher.
The Nasdaq led the indices with a gain of 1.00% and it was followed by the Russell with a move of 0.48%. The S&P tacked on 0.27% and the Dow dropped 0.31% as the lone index in the red.
The consumer discretionary sector jumped 1.29% to lead all sectors and the tech sector gained 0.68% for the second best performance.The financial sector fell 1.67% as the worst performer and the energy sector dropped 0.50% as the second worst performer.
My scans flipped back to a bearish skewed reading last night with 26 bearish signals and 12 bullish signals.
The barometer did manage to move up a little despite the negative net total.
The indicator rose to -9.6 from -16.4.
After alternating from bullish to bearish trade ideas over the last six trading sessions, I have a second straight bullish trade idea for you today. Chegg (NYSE: CHGG) appeared on my bullish scan last night and the company has great fundamental scores with an EPS rating of 99 and an SMR grade of an A.
We see on the chart how a trend channel has formed over the last three months and the stock just hit the lower rail of the channel. The daily stochastic indicators dropped to their lowest level since mid-June and made a bullish crossover yesterday. When this happened in March and June, the stock jumped over 50% in each case. I don’t think we will necessarily see that kind of jump again, but I can see the stock gaining 25% in the next couple of months.
Buy to open the October 75-strike calls on CHGG at $9.60 or better. These options expire on October 16. I suggest a target gain of 75% and that means the stock will need to move up to $91.80. The stock peaked just shy of $90 on August 7, so it will need to move a little higher than that to hit our target. I recommend a stop at $74.00.
— Rick Pendergraft
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