Tuesday turned out to be a pretty good day for stocks as the indices opened higher and then continued higher throughout the afternoon. All four of the main indices gained ground and closed near the highs of the day.
The Russell gained 2.4% to lead the way and it was followed by the S&P with a move of 1.29%. The gain from the S&P snapped a four-day losing streak and it did so with its best gain in three weeks.
The Nasdaq tacked on 1.25% and the Dow rallied by 1.13%.
All 10 sectors gained ground and eight of them moved up over 1.0%. The only two sectors that didn’t hit that threshold were the consumer staples sector (+0.24%) and the communication services sector (+0.82%).
The energy sector and the utilities sector tied for the top spot, both gaining 1.97%. The Materials sector jumped 1.81% as the third best performer.
My scans turned positive last night with 27 bullish signals and 12 bearish signals.
The barometer moved in to positive territory with a reading of 0.8, up from -25.7 on Monday. The positive reading is the first one in 26 trading days (November 5).
There were a few stocks and ETFs that got my attention last night, but in the end I felt like a bullish trade on the Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF (AMEX: ASHR) gave us the best odds of success. Because it’s an ETF we don’t have fundamental ratings, but the artificial intelligence platform I use generated a bullish signal on the fund yesterday as well and it shows the odds of a move higher at 88% over the next month.
The daily chart shows how a trend line has formed over the last few months and the fund just hit it last Friday. We also see that the stochastic indicators are down near the oversold mark, but reversed and made a bullish crossover last night. The last few times this happened turned out to be pretty good bullish signals.
Buy to open the March 37-strike calls on ASHR at $2.45 or better. These options expire on March 19, 2021. I suggest a target gain of 100% and that means the fund will need to reach $42.00. The fund will have to break to a new high, but based on the last few instances where the stochastics made the bullish crossover, it should be able to get to our target. I recommend a stop at $37.40.
— Rick Pendergraft