Stocks jumped out of the gate on Monday after it was announced late Sunday that President Trump had signed the latest stimulus bill. All four opened higher, but only three of them would hang on to their gains. The Russell turned lower and finished with a loss of 0.32%.
The S&P was the top performer on the day with a gain of 0.87%. The Nasdaq tacked on 0.74% and the Dow notched a gain of 0.68%. The gains meant new all-time closing highs for all three indices.
Eight of the 10 sectors gained ground on the day with three gaining over 1.0%. The communication services sector gained 1.77% to lead the way and it was followed by the consumer discretionary sector (+1.13%) and tech (+1.11%)
The energy sector fell 0.71% as the worst performer and the materials sector dropped 0.42% as the other sector that finished in the red.
My scans were pretty even on Monday with 40 bullish signals and 39 bearish signals.
The barometer moved higher for a third straight day thanks to the positive reading. The final reading for Monday was -7.9, up from -21.8.
For the first time in a while I have two straight trade ideas on the bearish side. With the lists being relatively even, I had several opportunities to choose from, but I felt the best setup with the greatest odds of success was a bearish trade on Teladoc Health (NYSE: TDOC). The company scores a 22 on the EPS rating and a C on the SMR grading system.
As you can see on the chart, the stock has been trending lower since August. The highs from October form a downwardly sloped trend line and the stock hit that trend line last week before turning lower in the last few days. The daily stochastic indicators were in overbought territory and made a bearish crossover last night.
Buy to open the February 200-strike puts on TDOC at $17.20 or better. These options expire on February 19, 2021. I suggest a target gain of 75% and that means the stock needs to drop to $169.90. The stock was down at $168.50 in early November, so it won’t have to break that low to hit our target. I recommend a stop at $212.00.
— Rick Pendergraft
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