Investors took a more cautious stance after the holiday weekend and that led to losses from three of the four main indices. The Nasdaq started in positive territory, dropped in to negative territory, and then rallied to close with a gain of 0.17%.
The Russell took the worst hit with a drop of 1.36%. The Dow fell 0.60% and the S&P lost 0.20%. The Dow and S&P were both much lower in the middle of the session, but managed to rally in the afternoon.
Sector results showed a considerable range of returns on the day. Seven sectors fell and three moved higher. The utilities sector was the top performer with a gain of 0.47% and it was followed by the tech sector with a move of 0.38%.
On the down side, the energy sector got drilled for a 3.25% loss. The financial sector dropped 1.57% and the materials sector fell 1.48%.
My scans flipped back to the negative side on Tuesday with 25 bearish signals and 16 bullish signals.
The barometer changed very little once these results were added in to the calculation, dropping to 1.2 from 2.0 on Friday.
Despite the declines in the indices and sectors, and the negative result from the scans, I have a bullish trade idea for you today. After combing through all the signals I felt the best setup was on Arbor Realty Trust (NYSE: ABR). The company was on the bullish list and it has great fundamental ratings. The EPS rating is 87 and the SMR rating is an A.
The chart shows a trend channel forming over the last six months and the stock just hit the lower rail yesterday. The stock rallied over 20% in February and again from late March through late April. It rallied approximately 20% again from early May through early June. I am looking for another move in the 20% range over the next month or two.
Buy to open the October 15-strike calls on ABR at $2.90 or better. These options expire on October 15, 2021. I suggest a target gain of 100% and that means the stock will need to move up to $20.80. The target price is approximately 20% above yesterday’s low. I suggest a stop at $16.50.
— Rick Pendergraft
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