Friday saw stocks bounce back sharply. All four of the main indices opened in positive territory and moved higher throughout the day.
The Russell led the way with a gain of 2.17% while the Dow gained 1.30%. The S&P rallied 1.13% and the Nasdaq just missed the 1.0% mark with a gain of 0.98%.
All 10 main sectors moved higher on Friday and four gained over 1.0%. The financial sector was the top performer with a gain of 2.89% and it was followed by the energy sector which jumped 2.13%.
The utilities sector only moved up 0.12% and that was the smallest gain on the day. The healthcare sector tacked n 0.34% for the second smallest gain.
My scans flipped back to positive in a big way on Friday with 104 bullish signals and 19 bearish signals. That stopped a string of three straight negative results.
The barometer turned positive with the strong positive result, finishing at 25.8 after a reading of -10.1 on Thursday.
Even though there was a huge skew to the bullish side on Friday’s scans, there weren’t a great number of setups that I liked. The one I felt gave us the greatest odds of success was on the iShares MSCI Emerging Markets ETF (NYSE: EEM). We have seen a number of emerging market ETFs on the bullish list in the last few days and now we finally see one of the most active ETFs getting a bullish signal.
We see on the chart how the fund trended higher from November through February, but then went through a little downturn. A new trend formed off the March low and a trend channel has formed. The fund hit the lower rail of the channel last Thursday and then gapped higher on Friday. I look for the trend to continue over the next month or more.
Buy to open the September 52-strike calls on EEM at $3.20 or better. These options expire on September 17, 2021. I suggest a target gain of 75% and that means the fund will need to reach $57.60. The target is above the June high, but below the February high. I suggest a stop at $52.20.
— Rick Pendergraft
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