After his statement sent stocks lower yesterday, President Trump’s tweets from Tuesday night sent stocks higher on Wednesday. The tweets suggested that he would support specific stimulus bills.
The indices opened higher and they remained there throughout the day, the rally even accelerated late in the day. The Russell led the way with a gain of 2.14% and the Dow was second with a move of 1.91%. The Nasdaq jumped 1.88% and the S&P tacked on 1.74%.
All 10 sectors moved higher on the day and only two failed to gain at least 1.0%. The utilities sector only gained 0.61% and the communication services sector tacked on 0.73%.
The materials sector was the top performer with a jump of 2.57%. Only two other sectors gained over 2.0% and they were the consumer discretionary sector (+2.29%) and the industrial sector (+2.21%).The scans remained negative last night with 20 bearish signals and 10 bullish signals.
Even though the lists were negative, the barometer rose a little. The final reading for Wednesday night was -25.2 after a reading of -33 on Tuesday.
I really like to keep some sense of balance between bullish and bearish ideas when volatility increases. With that in mind, I must admit that I looked more closely at the bullish list last night. The stock I felt gave us the best odds of success was Micron Technology (Nasdaq: MU). The company’s fundamentals are mixed with an EPS rating of 92, but the SMR rating is only a C.
There a few things on the chart that I liked. First, I like the fact that the stock dropped below its 50-day moving average, but popped back above it yesterday. The short-term trend line should help act as support going forward. And lastly, I like how the stochastic indicators moving out of oversold territory with a bullish crossover.
Buy to open the November 45-strike calls on MU at $5.00 or better. These options expire on November 20. I suggest a target gain of 75% and that means the stock will need to reach $53.75. The stock was trading above $54 as recently as July, so it won’t have to break through too much resistance to hit our target. I suggest a stop at $46.00.
— Rick Pendergraft
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