When futures trading opened on Sunday night and when the cash market opened on Monday morning, it looked like the selling we saw on Friday was going to carry over to a second day. But that wasn’t the case at all. After opening sharply lower, all four of the indices rallied back to close in the black.
The Nasdaq was the first of the four to turn around and it ended up with the biggest gain at 0.56%. The S&P moved in to positive territory near midday and ended up with a gain of 0.35%. The Dow moved up 0.24% and the Russell edged up 0.14%.
Eight of the 10 sectors ended up moving higher while one was unchanged and one took a loss.The materials sector fell 0.44% as the only sector in the red and the financial sector was unchanged.
The communication services sector led the way with a gain of 1.34% and the energy sector was the second best performer with a gain of 0.78%.
My scans were rather small on both sides on Monday.
There were only four names on the bullish side and eight on the bearish side.
The barometer continued its ascent towards positive territory and finished the day with a reading of -6.1. The reading on Friday was -10.7.
With the limited number of stocks to choose from, I wasn’t sure if I was going to find a trade idea from the scans for today. I did find a chart setup that I like and the company is Cardinal Health (NYSE: CAH). The company scores a 62 on the EPS rating system and a B on the SMR scale.
The daily chart shows how the $49 area has acted as resistance in the past and now appears to be acting as support. The stock struggled to move above $49 in May and July, but then broke through in October. There was a small pullback after it broke through and that pullback was halted just below the $49 level.
Buy to open the February 47.50-strike calls on CAH at $3.70 or better. These options expire on February 21. In order for these options to double the fund will need to reach $54.90. The stock moved up to the $56 area at the peaks in November so it won’t have to break to a new high. I suggest a target gain of 100% with a stop at $48.50.
— Rick Pendergraft
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