Thursday’s abbreviated session saw three out of the four main indices move higher and one moved lower. The stimulus bill that investors seemed to believe was a done deal is still in limbo as President Trump hasn’t signed the bill yet.
The Russell would finish with a loss of 0.16% as the only one that finished in the red, but it closed well off its lows. The S&P led the way with a gain of 0.35% while the Nasdaq gained 0.26% and the Dow moved up 0.23%.
Nine of the 10 sectors moved higher with only the energy sector losing ground. Energy stocks seem to be marching to their own beat right now and the sector seems to be the leading sector or the worst performing sector almost every day.
The utilities sector led the way on Thursday with a gain of 0.71%. It was followed by the tech sector which gained 0.66% and the materials sector with a move of 0.63%.
My scans turned slightly more negative on Thursday with 34 bearish signals and 19 bullish signals.
The barometer rose despite the negative reading, rising from -34.4 to -21.8.
The recent trend on my trade ideas seems to be a bullish idea followed by a bearish one. That trend continues today with a bearish idea on Digital Realty Trust (NYSE: DLR). The company’s fundamentals aren’t terrible with an EPS rating of 53 and an SMR grade of a B, but the chart is the main driver here.
The daily chart shows how the stock hit resistance at its 50-day moving average on Wednesday before moving sharply lower that day. That loss caused the stochastic readings to fall and they made a bearish crossover on Thursday and the indicators are in overbought territory.
Buy to open the February 140-strike puts on DLR at $7.40 or better. These options expire on February 19, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $127.05. We see that the stock found support just below the $127 level a few weeks ago, but the stock won’t have to break that to hit our target. I recommend a stop at $141.00.
— Rick Pendergraft
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