Stocks snapped a three-day losing streak on Friday, or at least eh S&P did. The broad-market index gained 0.22% on the day as all four of the main indices notched gains. The Dow led the way with a gain of 0.39% and it was followed by the Russell with a gain of 0.31%. The Nasdaq lagged the others slightly, but still managed to move up 0.16% on the day.
Seven of the 10 sectors moved higher with the financial sector turning in the top performance with a gain of 0.74%.
[hana-code-insert name=’adsense-article’ /]The consumer discretionary sector tacked on 0.69% and that was good enough for the second best performance.The energy sector dropped 0.33% for the worst performance on the day while the consumer staples sector fell 0.16% and the tech sector declined 0.13%.
My scans turned positive on Friday night with 21 names on the bullish list and 11 on the bearish list.
That result ended a four-day negative run.
The barometer jumped from -30.4 to -15.5 once these results were added in to the tally.
None of the stocks on the bearish list stood out to me while three of the stocks on the bullish list looked like possible trade ideas.
In the end I felt the best setup was on Microchip Technology (Nasdaq: MCHP). The company’s fundamental ratings show a 70 EPS rating and an A on the SMR rating scale.
The daily chart shows how the stock has been trending higher since late May. What jumped out at me was how the stock has performed when the stochastic readings made a bullish crossover. The indicators did just that on Friday and looking at the last three instances, this one looks similar to the more rounded formation from May. When that crossover occurred, the stock rallied over 25% from the $80 area to just shy of $100.
Buy to open the January 90-strike calls on MCHP at $5.40 or better. These options expire on January 17. In order for these options to double the stock will need to reach $100.80. That price is just below the high from early November so the stock won’t have to break to a new high. I suggest a target gain of 100% with a stop at $89.75.
— Rick Pendergraft
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