Stocks were under modest selling pressure on Friday and the indices spent most of the day in negative territory. They did rally in the afternoon session and the Dow ended up posting a gain of 0.16% on the day. The other three indices finished with losses.
The Russell didn’t rally as much as the others and finished with a loss of 0.57% as the worst performer. The S&P and the Nasdaq both rallied off of their midday lows and nearly made it in to positive territory, but ended up with losses of 0.13% and 0.23%, respectively.
The sectors were split again on Friday with six moving lower and four moving higher. On the negative side, two sectors lost more than 1.0% and they were energy (-1.18%) and financials (-1.01%).
As for the top performer, the communication services sector posted a gain of 0.60% to lead the way. The industrial sector moved up 0.24% and the consumer staples sector was just behind it with a gain of 0.22%.
My scans were considerably less bearish on Friday, but there was still a negative skew to the lists. There were 24 bearish signals and 13 bullish signals.
The barometer moved up to -50.1 on Friday after a reading of -74.4 on Thursday.
Even though there were more bearish signals than bullish signals, the fundamental ratings on the bullish list were more convincing than the fundamentals on the bearish list. With that in mind, today’s trade idea is a bullish one on JD.com (Nasdaq: JD). The Chinese internet company has great fundamental ratings with an EPS rating of 97 and an SMR rating of an A.
The daily chart shows how a trend channel has formed over the last few months and the stock is just above the lower rail at this time. We also see that the daily stochastic indicators are in oversold territory and made a bullish crossover on Friday. The last few instances where this has happened have been pretty solid bullish signals.
Buy to open the February 80-strike calls on JD at $7.55 or better. These options expire on February 19, 2021. I suggest a target gain of 100% and that means the stock will need to reach $95.10. That target is above the high in early November, but based on the previous moves when the stochastic indicators have made bullish crossovers I think the target is attainable. I recommend a stop at $80.00.
— Rick Pendergraft