Stocks started the week on a pretty good note as Treasury Secretary-Elect Janet Yellen testified before Congress. The former Fed chair said the federal government needs to “act big” in the next round of stimulus. This boosted the confidence of investors and all four indices finished higher.
The Nasdaq led the way with a gain of 1.53% and it was followed by the Russell with a jump of 1.32%. The S&P 500 moved up 0.81% and the Dow edged up 0.38%.
Eight of the 10 sectors moved higher on the day with the energy sector leading the way. The sector jumped 2.01%. The communication services sector gained 1.81% and that was good enough for the second best performance. The tech sector (+1.3%) was the only other one to gain more than 1.0%.
The two sectors that fell were the safe-havens. The consumer staples sector dropped 0.44% and the utilities sector fell 0.38%.
My scans were much closer to neutral last night after a pretty bearish result on Friday. There were 22 bearish signals and 17 bullish signals for Tuesday.
The barometer rose to -40.6 from -63.6 once these results were added in to the calculation.
With a balanced scan result from last night, I was hoping to have a few trade setups to choose from on each side. Unfortunately there was only one on each side that I liked. The one I feel gives us the greatest odds of success is a bullish trade on the Communication Services Select Sector SPDR (NYSE: XLC). We don’t have fundamental ratings on the XLC since it’s a fund, but it did get a bullish signal from Tickeron on Friday. Tickeron is an artificial intelligence platform that I use.
The chart for the XLC shows a trend line connecting the lows from March and October and the stock hit it in the last few days. We see an upper rail forming in the last few months that connects the highs from October, November, and December. I look for the fund to make a similar move to what we saw from late October through early December. The XLC gained over 15% during that stretch.
Buy to open the March 65-strike calls on XLC at $4.50 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 $74.00. The fund may gap higher this morning because Netflix had pretty strong earnings last night after the close. I recommend a stop at $64.00.
— Rick Pendergraft
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