Wednesday brought a slew of economic reports ahead of the open and several were better than expected. That allowed the indices to start the day on a positive note, except for the Nasdaq which opened in the red. The index did rally, but a late move lower took it back down in to negative territory.
The Russell led the way with a gain of 0.87% and it was followed by the Dow which gained 0.38%. The S&P tacked on 0.07% and the Nasdaq would finish with a decline of 0.29%.
Eight of the 10 sectors would move higher on Wednesday with only the tech and utilities sectors finishing lower. The tech sector fell 0.76% and utilities dropped 0.20%.
The energy sector led the way with a gain of 2.21% and the financial sector jumped 1.65% for the second best performance. Those were the only two sectors that gained over 1.0%.
My scans were pretty close to even last night with 40 bullish signals and 44 bearish signals.
The barometer would rise to -34.4 from -48.2 with the more neutral reading from the scans.
The two lists were somewhat odd last night as the bullish signals had some pretty poor fundamentals and the bearish list had some pretty strong fundamentals. After sorting through the stocks and looking at all the charts, I decided on a bullish trade on 21st Century Fox (Nasdaq: FOXA). The company was on the bullish list and it has an EPS rating of 85 and an A on its SMR rating.
We see how a short-term upward trend has been defined by a series of higher lows over the last month and a half. The stock turned higher yesterday after hitting the trend line on Tuesday. We also see that the RSI and the stochastic indicators were in or near oversold territory before turning higher yesterday.
Buy to open the February 25-strike calls on FOXA at $2.50 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 $32. The stock was above that level in June, so it won’t have to hit a new 52-week high. I recommend a stop at $26.75.
— Rick Pendergraft
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