Stocks wobbled back and forth a bit on Wednesday with three of the four indices spending a little time in negative territory toward the middle of the day. All four indices opened higher but then pulled back in the late morning. All four would rally in to the close and finish with decent gains.
The Nasdaq was the only one that didn’t reach negative territory all day and it led the way with a gain of 1.44%. The Russell moved up 0.81%, the S&P tacked on 0.78%, and the Dow gained 0.68%.
Six sectors moved higher on Wednesday while one was unchanged and three moved lower.The tech sector led the way with a gain of 1.61% and it was followed by the consumer discretionary sector with a jump of 1.07%.
The materials sector took the biggest hit at 1.42% and it was followed by the consumer staples sector which lost 0.25%.
My scans remained skewed to the negative side again last night, but the difference between the two lists was much smaller. There were 27 bearish signals and 20 bullish signals on the day.
The barometer actually rose slightly, climbing up to -32.2 from -39.8.
There were a couple of stocks on the bullish list that stood out to me last night, but the one that got my attention the most was Fifth Third Bancorp (Nasdaq: FITB). The company scores an 80 on its EPS rating and an A on its SMR grade. The company is set to report earnings on July 23 and analysts have ratcheted down their consensus forecast considerably over the last few months. From a contrarian perspective, having the EPS estimate lowered is a good thing as it makes it easier for the company to surprise in a positive fashion.
The stock has been trending higher over the last four months with the lows connecting nicely. The lows from March and May connect to form the upward sloped trend line and the stock just hit it. The stock has been oversold for over a week now and I think it could be ready to bounce higher.
Buy to open the August 17-strike calls on FITB at $2.15 or better. These options expire on August 21. I suggest a target gain of 100% and that means the stock will need to reach $21.30. The stock was above $24.50 in early June and it won’t have to get anywhere near that high for these options to double. I recommend a stop at $17.10.
— Rick Pendergraft
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