Stocks screamed higher on Friday after the May employment report showed job growth of 2.5 million and an unemployment rate of 13.3%. What seemed to go unnoticed was a footnote that pointed out a “miscalculation error” that likely caused the unemployment rate to be three percentage points lower than it should have been.
All four of the main indices screamed higher on Friday with the Russell leading the way with a gain of 3.79% and it was followed by the Dow with a gain of 3.15%. The S&P jumped 2.62% and the Nasdaq posted a gain of 2.06%.
All 10 sectors moved higher on the day, but the clear leader was the energy sector with a jump of 7.43%.The financial sector soared by 3.72% and the industrial sector posted an impressive 3.67% gain.
The smallest gain of the bunch was 1.27% and that was the utilities sector.
The consumer staples sector gained 1.39% and the healthcare sector tacked on 1.61%.
Those were the three smallest gains.
My scans were extremely negative on Friday as more and more stocks moved to extreme overbought levels. There were 194 bearish signals and two bullish signals.
The barometer tumbled to -116.5 from -62.6 as a result of the lopsided figures. That is the lowest reading for the indicator since April 16.
With so few bullish signals and an abundance of bearish signals, today’s trade idea is a bearish one. Camping World Holdings (NYSE: CWH) appeared on the bearish list and it has terrible fundamental indicators with an EPS rating of 34 and an SMR rating of an E.
Camping World has been on a tremendous run from its March low and has gone up over 500%. The stock is tremendously overbought as you might imagine, but Friday saw the stock setup a bearish engulfing pattern and the stochastic indicators made a bearish crossover. I took note of the $16.55 area acting as resistance in January and February, and then the stock paused there in May before breaking out. I can see the stock dipping back down to the $16.50 area.
Buy to open the July 24-strike puts on CWH at $4.00 or better. These options expire on July 17. I suggest a target gain of 75% and that means the stock will need to drop to $17.00. The stock had seen a couple of rallies stall in the $16.55 area in January and February, and it stalled there in May. That could mean the stock will find support there if it pulls back like I think it will.
— Rick Pendergraft
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