Tuesday saw the indices start off on a positive note with all four opening in the black, but that wouldn’t last long as the Russell and Nasdaq dropped early on and moved in to negative territory. The S&P and the Dow managed to remain in positive territory a little longer, but eventually they would fall as well. The Senate’s reluctance to vote on larger personal stimulus payouts seemed to be a tipping point.
The Russell was the worst performer on the day with a drop of 1.85%. The Nasdaq fell 0.38% while the Dow and S&P had matching losses of 0.22%.
Eight of the 10 sectors lost ground on the day. The energy sector was the worst performer once again, this time with a decline of 0.82%. The industrial sector fell 0.66% as the second worst performer.
The healthcare sector gained 0.44% to lead the way while the consumer discretionary sector inched up 0.03% as the only other sector to close in positive territory.
My scans flipped back to a negative reading after a positive reading on Monday. There were 28 bearish signals and 11 bullish signals.
The barometer dropped ever so slightly once these results were added in to the equation, falling from -7.9 to -9.9.
Even though there were far more bearish signals than bullish signals, the fundamental ratings on the bullish list were rather impressive. Eight of the 11 stocks had EPS ratings over 80 and seven had A SMR ratings. Today’s bullish trade idea is on a company that met both of those thresholds. Bristol Myers Squibb (NYSE: BMY) has an EPS rating of 98 and the SMR rating is an A.
The daily chart shows that the stock has been trending higher since the end of October. A trend line connects the lows from October and earlier this month. The stock just hit the trend line and then turned higher. The stock looks primed to make another move higher.
Buy to open the February 60-strike calls on BMY at $2.92 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 $65.84. The stock peaked just above $66 in November, so it won’t have to break to a new high to hit our target. I recommend a stop at $60.20.
— Rick Pendergraft
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