The market started off on a positive note as initial jobless claims were worse than expected. The bad news seemed to encourage investors in to thinking that the bad news would allow strengthen the case for another round of stimulus under the new administration. All four main indices were in positive territory throughout the morning, but three would turn lower and finish in the red.
The Russell led the way with a gain of 2.05% and it didn’t really dip in the afternoon. The S&P fell 0.38% as the worst performer, the Dow dropped 0.22%, and the Nasdaq declined 0.12%.
On the sector front, the majority of the groups fell on the day with seven sectors finishing lower and only three moving higher. The energy sector continued to move against the grain and it gained 2.96%. The financial sector gained 0.51% and the industrial sector gained 0.33%.
Tech stocks seemed to get hit the hardest and the sector fell 0.91%. The consumer discretionary sector dropped 0.58% and the communication services sector was right behind it with a loss of 0.57%.
My scans turned in another negatively skewed result on Thursday, but the results weren’t as bad as what we had seen in the three previous days. There were 42 bearish signals and 21 bullish signals.
The barometer moved up a little with the bearish skew dropping. The final reading for last night was -51.5, up from -66.6 on Wednesday.
Despite the fact that there were 63 stocks and ETFs on the two lists combined, I had a hard time finding many trade setups that I liked. The one that made the most sense to me was a bullish trade on 3M Company (NYSE: MMM). The company gets a 57 on its EPS rating and it gets an A on the SMR grading scale.
We see on the chart how a trend channel has formed over the last six months and the stock is down at the lower rail currently. The stock is oversold based on the stochastic indicators and the RSI was at the 20 level a few days ago. The stochastic indicators made a bullish crossover last night and I think we could see a similar move to what we saw in November.
Buy to open the March 160-strike calls on MMM at $10.75 or better. These options expire on March 19, 2021. I suggest a target gain of 100% and that means the stock will need to reach $181.50. That would be slightly higher than the November high, but the upper rail will be well above that price in a few weeks. I recommend a stop at $163.00.
— Rick Pendergraft
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