Stocks were mixed on Friday with two indices moving higher and two moving lower. All four started out in positive territory, but some selling pressure hit in the afternoon and that erased gains across the board.

The Dow led the way with a gain of 0.39% and the S&P eked out a gain of 0.01%. The Nasdaq dropped 0.36% as the worst performer and the Russell fell 0.31%.

Despite the split results from the indices, the sectors were skewed to positive side. Seven sectors moved higher and only three moved lower. The utilities sector moved up 1.07% as the top performer and it was followed by the healthcare sector which gained 0.99%.

The energy sector was by far the worst performer on the day, losing 2.27%. The consumer discretionary sector fell 0.91% and the tech sector fell 0.29%.

My scans continue to produce more bearish signals than bullish signals with the count on Friday being 22 bearish signals to only five bullish signals.

The barometer rose to -57.0 from -89.4 as the weighting drops for the huge bearish readings from earlier last week.

I didn’t really want to make a sixth straight bearish trade idea, but I also didn’t really like any of the five trade setups on the bullish list. Instead I went to a chart list of stocks that I know have great fundamental ratings and I chose a bullish trade idea on Electronic Arts (Nasdaq: EA). The company’s EPS rating is 91 and the SMR rating is an A.

We see on the weekly chart that EA pulled back in August and September, but it appears to have bottomed and looks ready move higher again. The weekly stochastic indicators just made a bullish crossover and four of the last five instances of similar crossovers the stock has moved higher.

Buy to open the January 2021 130-strike calls on EA at $10.35 or better. These options expire on January 15, 2021. I suggest a target gain of 100% and that means the stock will need to reach $150.70. The stock peaked at $151.26 in July ’18, so it won’t have to break that potential resistance to hit our target. I recommend a stop at $124.00.

— Rick Pendergraft

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