Friday’s trading action brought mixed results with two of the main indices moving higher and two moving lower. The Dow lost 1.5% and it was the only one that was in negative territory for the entire day. The S&P dropped 0.48%, but it spent a good portion of the day in positive territory before some late selling took it in to negative territory.
The Nasdaq gained 0.56% on the day and that was the top performance of the bunch. The Russell inched higher by 0.04% and some late selling took away most of the gains.
Seven of the 10 main sectors lost ground on the day. The energy sector took the biggest hit at -2.37%. The financial sector fell 1.91% and the utilities sector dropped 1.85%.
The tech sector led the way with a gain of 0.53% and the consumer discretionary sector moved up 0.42%. The communication services sector joined those two in positive territory with a gain of 0.39%.
My scans turned in a second straight negative result with 30 bearish signals and nine bullish signals.
The barometer dropped a little deeper in to negative territory with a reading of -13.6, down from -5.0 on Thursday.
Even though there were more bearish signals than bullish ones, the trade setup that jumped out to me was a bullish one. The company is Etsy (Nasdaq: ETSY) and it has great fundamental ratings. The EPS rating is a 99 and the SMR rating is an A. Those are the two highest scores a stock can get in these categories.
On the chart we see how Etsy has been trending higher and how a trend channel has formed. The stock dropped down to $190 this past week and that low connects to form the lower rail. The upper rail was already in place. The last time the overbought/oversold indicators were both below 50 and then turned higher was at the beginning of January and the stock rallied over 40% from there.
Buy to open the April 210-strike calls on ETSY at $27.50 or better. These options expire on April 16, 2021. I suggest a target gain of 75% and that means the stock will need to reach $258.15. This is a pretty high-priced option, but I felt it offered the best risk/reward ratio. I recommend a stop at $189.00.
— Rick Pendergraft