Stocks bounced back a little on Tuesday after the late selling on Monday. All four indices opened higher and were able to remain in positive territory throughout the day, even though they closed well off their highs. The Nasdaq snapped a five-day losing streak and the S&P moved higher for only the second time in the last six trading days.
The S&P led the way with a gain of 0.47% and it was followed by the Dow which moved up 0.40%. The Nasdaq gained 0.33% and the Russell tacked on 0.25%.
Nine of the 10 sectors moved higher on Tuesday with the consumer staples sector losing 0.09% as the only one in the red. The healthcare sector finished with a gain of 0.08% and that was the smallest gain of the bunch.
The energy sector flipped the script from the last few days as it was the top performer yesterday. The sector gained 1.12% and was the only one to gain more than 1.0%. The consumer discretionary sector gained 0.76% as the second best performer.
My scans moved to a neutral reading last night with eight signals from both the bullish scan and the bearish scan. This snapped a streak of 10 straight negatively skewed results.
The barometer continued to climb and finished with a reading of -10.8 last night. Last Tuesday night the indicator was at -107.3.
Last night’s list were interesting in that there were far more negative fundamental marks on the bullish list than the bearish list, and there were far more positive fundamental marks on the bearish list than the bullish list. While it made it difficult to make a decision, I chose a bullish trade idea on Huazhu Group (Nasdaq: HTHT). The company scores a 7 on the EPS rating scale and a C on the SMR rating system.
The chart is what me select Huazhu Group and as you can see the stock has been trending higher since the March lows. The trend channel captures most of the daily closes with the exception of a stretch in late July. The lower rail connects several lows from the last seven months and the upper rail connects the highs very neatly.
Buy to open the December 40-strike calls on HTHT at $4.80 or better. These options expire on December 18, 2020. I suggest a target gain of 75% and that means the stock will need to reach $48.40. This is above the highs from September and earlier this month, but the all-time high is just above $48.50 so it won’t have to break that level. I recommend a stop at $40.50.
— Rick Pendergraft