Stocks got off to a slow start on Monday, but it didn’t stay that way for long. Three of the four indices opened lower, but they would reverse rather quickly. All four finished higher, but the Russell really had to work to post a small gain of 0.08%.
The Dow was the top performer with a gain of 0.36% and it was followed closely by the S&P which moved up 0.35%. The Nasdaq spent most of the day hovering near breakeven before finishing 0.21% higher.
Eight of the 10 main sectors moved higher on the day. The only two that finished lower were the energy sector (-0.19%) and the consumer staples sector (-0.16%).
The financial sector rallied 0.98% as the top performer and the communication services sector gained 0.71% as the second best performer.
My scans turned in a second straight positive result last night with 57 bullish signals and 16 bearish signals.
The barometer moved up to 37.2 from 25.8 once these results were added in to the calculation.
One of the bigger themes to yesterday’s bullish list was the number of energy stocks and ETFs that generated signals. One of those companies in particular got my attention and it was EOG Resources (NYSE: EOG). The company’s fundamental ratings are mixed with an EPS rating of 78 and an SMR rating of a D. This tells me that the company has been growing earnings, but its sales, ROE, and profit margin are lagging.
Despite the mixed fundamental ratings, I like the daily chart and the trend channel that has formed over the last eight months. We see that the stock just hit the lower rail of the channel and looks poised for a bounce. The chart pattern this time reminds me of the one in the March/April timeframe. We see the stock rally and then slowly drift lower for about a month. The stock has drifted lower over the past month as well, but now I look for it to rally like it did from mid-April through early May.
Buy to open the August 75-strike calls on EOG at $9.60 or better. These options expire on August 20, 2021. I suggest a target gain of 100% and that means the stock will need to reach $94.20. The target would mean the stock had reached a new high, but it is only approximately 18.5% above the recent low. The rallies in December/January, February, and April/May were much greater than 18.5%. I suggest a stop at $76.00.
— Rick Pendergraft
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