Stocks soared on Friday as the October employment report came in better than expected and that set the tone early on. The rallied brought about sizable gains for all three of the main indices with the Russell leading the way with a gain of 1.72%.
The Nasdaq tacked on 1.13%, the Dow moved up 1.11%, and the S&P lagged slightly with a gain of 0.97%.
[hana-code-insert name=’adsense-article’ /]The sectors flipped their results from Thursday with eight of the 10 main sectors moving higher and two moving lower.The energy sector led the way with a jump of 2.28% and the industrial sector was close behind with a gain of 2.18%.
Those were the only two that gained over 2%, but another three gained over 1%.
The utilities sector fell 0.25% and that was the worst performance on the day.
The consumer staples sector lost 0.02% and was evidence of the risk-on environment on Friday.
My scans finally halted their negative stretch on Friday and it was by the smallest margin possible.
There were 19 names on the bullish list and 18 on the bearish side. Despite the differential of one, it did halt the negative string at 13 trading days.
The barometer moved up quite a bit, but it remains in negative territory. The final reading came in at -22.3 after a reading of -37.6 on Thursday.
Today’s trade idea comes from the bullish list and it carries a little more risk than usual. Match Group (Nasdaq: MTCH) is set to report earnings after the close on Tuesday and it was on the bullish list Friday night. The company scores a 90 on the EPS rating system and it gets an A on the SMR scale. Another factor behind this trade is the huge short position on the stock. The short interest ratio is at 13.4 and a ratio that high could spur a short-covering rally should the company issue a positive surprise.
Looking at the weekly chart we see that the stock is almost in oversold territory and that is something that hasn’t happened very often in the last three years. The daily stochastic readings made a bullish crossover on Friday and that was one of the triggers for the stock being on the bullish list.
Buy to open the December 70-strike calls on MTCH at $7.00 or better. These options expire on December 20. In order for these options to double the stock will need to reach $84.00, but I think the stock can get there if the earnings beat estimates. The stock hovered near the $85 level for the entire month of August, so the stock won’t have to break to a new high to reach our target. I suggest a target gain of 100% with a stop at $69.50.
— Rick Pendergraft
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