The indices were mixed again on Tuesday with one moving higher and three moving lower. All four would open in negative territory, but the Russell moved in to positive territory shortly after the opening bell and it would finish with a gain of 1.72%.
As for the other three, only the Nasdaq spent any time in positive territory, but some last minute selling caused it to drop 0.11% on the day. The Dow fell 0.31% and the S&P lost 0.32% as the worst performer.
The sector action showed three moving higher, one unchanged, and six lost ground. The consumer discretionary sector led the way with a gain of 0.98% and it was followed by the financial sector which gained 0.70%. The industrial sector moved up 0.44% and the communication services sector was the one that was unchanged.
Consumer staples took the biggest hit and the sector fell 1.07%. The tech sector dropped 0.95% as the second worst performer. The utilities sector and healthcare sector both dropped 0.90%.
My scans continued to produce positive results and last night’s showed 57 bullish signals and 38 bearish signals.
The barometer fell to 40.9 from 50.5 once last night’s results were added in to the calculation.
There were more bullish signals than bearish signals that caught my eye last night and I felt the best opportunity was on the Communication Services Select Sector SPDR (NYSE: XLC). Because it’s an ETF, we don’t have the fundamental ratings that we normally look at, but I can tell you that the fund received a bullish signal from Tickeron, the AI platform I use, last night as well. The signal showed a 90% chance of the fund moving higher over the next month.
We see on the daily chart how a trend channel has formed since the end of October and the stock just hit the lower rail of the channel. The 50-day moving average is just above the lower rail and that gives the XLC two different layers of support to bounce off of. The last time we saw the indicators down near oversold territory and at the lower rail of the channel, the stock rallied 14% in just under a month.
Buy to open the May 72-strike calls on XLC at $3.70 or better. These options expire on May 21, 2021. I suggest a target gain of 100% and that means the fund will need to reach $79.40. From the low last week, that target would mark a 12% move, not quite as big of a move as last time. I recommend a stop at $70.75.
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