Thursday proved to be a bit of a tough day for stocks. All four of the indices opened lower and three of the four would finish in the red. The Dow eked out at a gain of 0.15% as the only one that finished in the black.
The Nasdaq fell 0.70% as the worst performer and it was followed by the Russell with a loss of 0.65%. The S&P declined 0.33% to round out the losses.
We saw better balance from the sectors as five moved higher and five moved lower. The utilities sector turned in the top performance with a gain of 1.14%. Consumer staples moved up 0.41% for second place.
The energy sector was the worst performer for a second straight day, this time with a loss of 1.44%. The tech sector fell 0.82% and that was the second worst performance.
The scans were negative for a third straight night and this time it was with 25 bearish signals and seven bullish signals.
The barometer moved in to negative territory once the results were added in to the calculation, snapping a string of four positive readings in a row. The final reading on Thursday was -14.8, down from 0.5 on Wednesday.
After three straight bearish ideas, I have a bullish one for you today. Yum China Holdings (NYSE: YUMC) appeared on the bullish list last night and it has good fundamental ratings. The EPS rating is 89 and the SMR rating is a B.
The one thing that jumped out the most for me was how the $64.50 area acted as resistance back in February and now appears to be acting as support. The stochastic indicators have been in oversold territory for a few days now, but they made a bullish crossover last night. The pattern in the indicators is similar to what we saw in late March, just before the stock rallied 10% in one month and 20% in just over two months.
Buy to open the September 62.50-strike calls on YUMC at $4.40 or better. These options expire on September 17, 2021. I suggest a target gain of 75% and that means the stock will need to reach $70.20. Our target is slightly above the high in early June, but I believe the stock can get there. I suggest a stop at $63.90.
— Rick Pendergraft
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