Wednesday was a bit of an odd day for the equity markets, or at least the domestic indices. They opened higher, dipped for the first half hour or so, and then rallied higher. The gains lasted most of the day and then the Fed announced its rate decision at 2:00 PM. The indices trended lower from that point on.
By the end of the day, two of the indices finished with small gains and the other two finished with losses.
The Nasdaq led the way with a gain of 0.06% and it was joined in the black by the Dow which moved up 0.04%.The S&P fell 0.09% and the Russell fell more significantly at 0.55%.
The sectors were split on the day with six moving lower and four moving higher.
The energy sector dropped 1.05% and that was by far the biggest move in either direction.
The second worst performer was the consumer staples sector which fell 0.50%.
The top performer on the day was the industrial sector with a gain of 0.53%. The materials sector moved up 0.32% and that was good enough for second best.
My scans turned decidedly more positive yesterday with 52 names on the bullish list and six on the bearish side.
The barometer jumped from 7.4 to 24.9 with the results counted and that is the highest reading since December 6 for the indicator.
With the overwhelming number of options on the bullish side it was much easier to find a bullish trade idea. Today’s trade idea is on the iShares MSCI Emerging Markets ETF (NYSE: EEM). Obviously we don’t have fundamental readings on the fund, but it did get a bullish signal from Tickeron A.I. model. The signal showed a confidence level of 83% and past signals have been successful 78% of the time.
The daily chart for the EEM shows a trend line connecting the lows from the last five months. The fund just hit the trend line earlier this week and has since bounced. We also see that the oscillators were at their lowest levels since early December—just before the fund rallied over 10%.
Buy to open the March 42-strike calls on EEM at $2.40 or better. These options expire on March 20. In order for these options to double the fund will need to reach $46.80. That would mean reaching a new 52-week high, but based on previous moves off the lower rail I think it can reach that target. I suggest a target gain of 100% with a stop at $42.75.
— Rick Pendergraft
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