One day after quite a bit of positive news, the market was hit some concerns regarding the trade talks between the U.S. and China. This led to all four of the main indices moving lower and we have the October employment report coming out this morning and that will certainly impact today’s trading. There is also the ISM report coming out later in the morning.
The Russell took the biggest hit on Thursday with a loss of 0.66% and it was followed by the Dow which dropped 0.52%. The S&P declined 0.30% while the Nasdaq took the smallest loss at 0.14%. The Nasdaq was buoyed by positive earnings results from Apple.
[hana-code-insert name=’adsense-article’ /]Eight of the 10 main sectors moved lower on Thursday with the materials sector taking the worst loss at 1.12%.The industrial sector dropped 1.07% and that was the second worst loss.
These were the only two sectors that fell more than 1%.
The utilities sector was the top performer with a gain of 0.55% and it was joined in positive territory by the communication services sector with a gain of 0.30%.
Facebook’s post earnings gain certainly helped the communication services sector.
My scans stretched their run of negative readings to 13 last night with 44 names on the bearish list and 15 on the bullish side.
The barometer inched up a little, moving from -40.4 to -37.6.
After three straight bearish trade ideas, I have a bullish one for you today and it is on DR Horton (NYSE: DHI). The company scores an 87 on the EPS rating and a B on its SMR rating. The company is set to report earnings on November 12, so you will want to keep an eye on that.
DR Horton has been trending higher since last December, but a clearly defined trend channel has formed over the last four months. The stock dropped down to the lower rail during Wednesday’s trading session and it quickly recovered. The daily stochastic readings flirted with oversold territory, but they have now reversed and performed a bullish crossover.
Buy to open the December 50-strike calls on DHI at $3.80 or better. These options expire on December 20. In order for these options to double the stock will need to reach $57.60. That will be a new high for the stock, but looking at the past moves from June and July—after the stock hit the lower rail, I think it can reach the target. I suggest a target gain of 100% with a stop at $49.90.
— Rick Pendergraft
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