Monday was a strange day in that it seemed like there wasn’t any correlation between the indices at all. The Nasdaq opened higher and trended higher through most of the day, closing at the high of the day and with a gain of 0.74%.
The S&P opened lower, moved deeper in to negative territory, but then rallied at the end of the day to finish with a gain of 0.18%. The Dow had a similar path to the S&P, only it didn’t quite make it back to positive territory and finished with a loss of 0.25%.
The Russell opened higher and then trended lower throughout the day. It closed near its low of the day and with finished with a loss of 0.51%.
On the sector front we had an even split, five moved higher and five moved lower. The tech sector led the way with a gain of 1.01% and it was followed by the communication services sector with a move of 0.66%.
The materials sector fell 1.25% and was the worst performer on the day. The financial sector dropped 1.06% and was the second worst performer.
My scans turned in a positive result on Monday and that snapped a string of 13 straight negative results. There were 26 bullish signals and 23 bearish signals generated on the day.
The barometer continued its climb toward positive territory, but remains in negative territory with a reading of -11.0. The indicator came in at -22.4 on Friday.
Even though the scans turned positive last night, the lists were still relatively close to balanced. After considering the charts, the fundamentals, and the options available at this time, I felt a bearish trade on Exact Sciences (Nasdaq: EXAS) was our best opportunity at a successful trade. The company’s fundamentals are poor with an EPS rating of 27 and an SRM rating of a D.
We see on the chart how the stock has been trending lower over the last four months and a trend channel defines the cycles within the overall trend. The stock hit the upper rail of the channel yesterday. The stock is overbought based on both the RSI and the stochastic indicators with the latter making a bearish crossover last night.
Buy to open the July 130-strike puts on EXAS at $9.80 or better. These options expire on July 16, 2021. I suggest a target gain of 100% and that means the stock will need to drop to $110.40. The stock was down to $90 in mid-May, so it won’t have to break that low to reach our target. I suggest a stop at $129.50.
— Rick Pendergraft
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