Tuesday saw stocks flip the script from Monday. After a slow start that saw three of the indices in the red in the early going, an afternoon rally ensued and all four finished with solid gains.
The Dow was the only sector that didn’t move in to negative territory on the day and it finished with the biggest gain at 2.13%. The Russell jumped sharply in the final hour and finished higher by 1.76%.
The S&P moved up 1.34% and after being in negative territory for most of the day, the Nasdaq logged a gain of 0.94%
All 10 sectors finished higher on the day with energy leading the way with a gain of 3.51%. The materials sector gained 2.52% and the industrial sector jumped 2.17% to give us three sectors with gains better than 2.0%.
Three of the biggest banks in the U.S. reported earnings on Tuesday morning and the financial sector finished with the smallest gain of the bunch at 0.51%. Utilities experienced the second smallest gain at 0.93%.My scans flipped again on Tuesday with 32 bullish signals and seven bearish signals.
It has been a while since we have seen the lists flip back and forth like this.
The barometer jumped in to positive territory with those results, snapping a streak of six straight negative readings. The final reading last night was 5.7.
Among the many stocks on the bullish list were a number of real estate companies and REITs. One of them got my attention and that was Medical Properties Trust (NYSE: MPW). The company scores an 83 on the EPS rating system and a B on the SMR scale.
We see on the chart that the stock has been trending higher since the low in March and a trend channel has formed that connects the lows from the last three and a half months. The stock just bounced off of that lower rail and looks primed to rally in the weeks ahead. We also see that the daily stochastic indicators made a bullish crossover last night.
Buy to open the August 17-strike calls on MPW at $1.90 or better. These options expire on August 21. I suggest a target gain of 100% and that means the stock will need to reach $20.80. That target is slightly higher than the high in June, but below the upper rail. I recommend a stop at $17.25.
— Rick Pendergraft
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