Stocks screamed higher again on Monday, continuing the upward momentum from last week. All four indices opened higher and remained in positive territory throughout the day. They did slip a little at the end of the day to close off their highs.
The Nasdaq led the way with a gain of 2.56% and the S&P tacked on 1.64% to put it within striking distance of its all-time high. The Dow moved up 0.88% and the Russell registered the smallest gain at 0.70%.
Nine of the 10 sectors moved higher on the day with the material sector falling 0.17% as the only one in the red.
The tech sector jumped 2.73% to lead the way and the communication services sector was right behind at 2.64%. There were three more sectors that gained over 1.0%.
My scans remained negative and the bearish list got considerably longer. There were 46 names on the bearish list and only one bullish signal.
The barometer fell from -16 to -24.4 once these results were added in to the equation.
With only one bullish signal, there wasn’t much to choose from except from the bearish list. And there were only a few that got my attention on that list. The one that I felt gives us the best odds of success is LyondellBasell Industries (NYSE: LYB). The company has a poor EPS rating at 29 and the SMR rating is only average with a C grade.
The chart shows the potential for a double-top formation in the $81 area. The stock peaked just shy of that level in mid-September and it peaked just above it last week. The stock was overbought based on the 10-day RSI and the daily stochastic readings before the stock turned lower yesterday.
Buy to open the December 80-strike puts on LYB at $8.20 or better. These options expire on December 18, 2020. I suggest a target gain of 75% and that means the stock will need to drop to $65.65. That target is lower than the low between the two highs, but for the double-top formation to be confirmed it is supposed to drop below the low between the two highs. I recommend a stop at $81.50.
— Rick Pendergraft
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