Thursday was a bit of a rollercoaster day for stocks and the indices reflected that. Three of the four opened lower with only the Russell opening in positive territory. The Nasdaq turned positive early and the S&P moved in to positive near midday. Unfortunately the market turned lower as word about President Biden’s plans to increase taxes on wealthy individuals.
By the end of the day all four indices would move in to negative territory at some point and the Russell would manage a small loss of only 0.11%. The Dow and Nasdaq posted matching losses of 0.94% and the S&P was right behind them with a drop of 0.92%.
All 10 sectors moved lower yesterday and five sectors lost over 1.0%. The worst performer on the day was the materials sector with a decline of 1.7%. The energy sector dropped 1.28% and that was the second worst loss.
The healthcare sector lost 0.49% and that was the best any of them could do. The industrial sector fell 0.50% and that was the second smallest loss.
My scans turned in a second straight positive result, but the difference between the two lists wasn’t near as big last night. There were 45 bullish signals and 38 bearish signals.
The barometer jumped to -4.5 from -15.4 as a result of the second positive result.
We saw the same pattern last night that we did on Wednesday night where the majority of companies on the bullish list had bad fundamentals and vice versa. There weren’t any trade setups on the bearish list that I liked at all and that led me to another bullish trade idea.
Today’s company is State Street (NYSE: STT) and its fundamental ratings aren’t great, but they aren’t as bad as American Airlines were yesterday. The EPS rating is 55 and the SMR rating is a C.
The chart shows how State Street has been trending higher over the last six months with a trend channel forming over the last four and a half months. The stock just hit the lower rail of the channel after it dropped post-earnings. The stock is in oversold territory based on the daily stochastic indicators, but they made a bullish crossover last night. The indicators made a similar move in late January and then the stock rallied over 20%.
Buy to open the June 75-strike calls on STT at $5.90 or better. These options expire on June 18, 2021. I suggest a target gain of 100% and that means the stock will need to climb to $86.80. The stock was above $87 a few weeks ago, so it won’t have to reach a new high to hit our target. I suggest a stop at $76.00.
— Rick Pendergraft
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