Stocks started off on a milder tone on Monday as it’s a big week for earnings and economic reports. All four indices would open modestly higher and things would get better for two of the four while one would stumble in the afternoon and one just maintained its position.
The Russell led the way with a gain of 1.15% and the Nasdaq followed with a gain of 0.87%. The S&P moved up 0.18% and the Dow fell 0.18%.
Six sectors moved higher on the day while four fell. The energy sector led the way with a gain of 0.67% and the materials sector rallied 0.59% for second place.
The consumer staples sector dropped 1.12% as the worst performer and the utilities sector fell 0.57% as the second worst performer.
My scans turned slightly negative last night with 19 bearish signals and 16 bullish signals. That snapped a three-day streak of positive results.
The barometer dropped from 22.6 to 18.1 once these results were added in to the calculation.
I was really looking for a bearish trade idea for today after three straight bullish ideas, but I didn’t like any of the setups on the bearish side. That led me to a bullish idea on EOG Resources (NYSE: EOG). The company’s fundamental ratings aren’t very good, but this is based more on the chart. The EPS rating is average at 52, but the SMR is below average at a D.
On the daily chart we see how the stock has been trending higher since late October with a trend channel forming to define the different cycles within the overall upward trend. The stock just hit the lower rail of the channel and looks like it is primed for its next move higher. The stochastic indicators barely hit oversold territory and made a bullish crossover last night.
Buy to open the June 65-strike calls on EOG at $7.40 or better. These options expire on June 18, 2021. I suggest a target gain of 100% and that means the stock will need to break the high from March. However, based on the previous moves when the stock has hit oversold territory, the two points that form the lower rail, I don’t think moving up to the $80 area is out of the question. I suggest a stop at $65.50.
— Rick Pendergraft
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