Stocks jumped on Wednesday and all four of the main indices closed at four-week highs. The boost seem to come from two developments—a slowdown in new cases of COVID-19 in New York and Italy, and the government considering exit plans for business shutdowns.
The Russell led the way once again and this time it was a gain of 4.61%. The Dow moved up 3.44% and the S&P was close behind with a gain of 3.41%. The Nasdaq lagged the other indices but still managed a gain of 2.58%.
All 10 of the main sectors moved higher on the day, but the gains varied greatly.The energy sector led the way with a gain of 6.67%.
The second best performance was a gain of 5.45% and that came from the utilities sector.
The consumer staples sector experienced the smallest gain at 1.48% and it was the only sector that didn’t gain at least 2%.
The communication services sector tacked on 2.21% for the second worst performance.
My scans turned negative after two straight days of positive readings. There were 26 bearish signals and three bullish signals.
The barometer dropped once these results were added in, falling from 10.9 to 0.4, barely staying in positive territory.
None of the stocks on the bullish list looked all that great from a fundamental or technical perspective. The one stock that stood out the most was on the bearish list and it was Fastly (NYSE: FSLY). The company scores a 10 on the EPS rating system and a D in the SMR category.
The daily chart shows how the stock has been trending lower since last September and if we connect that high with the high from February we get a trend line that is right at the $22.00 level. The stock has been able to reach a high of $21.29 on Tuesday before falling. The daily stochastic indicators are in overbought territory and made a bearish crossover last night.
Buy to open the June 23-strike puts on FSLY at $4.50 or better. These options expire on June 19. With the option premiums and volatility high, I suggest a target gain of 100%. The stock will need to drop to $14 for the options to reach our target. I suggest a stop at $22.20.
— Rick Pendergraft