Stock’s came under pressure again on Friday and all four of the main indices took pretty sizable hits as a result. All four opened lower and remained lower throughout the day. The Russell took the biggest hit, dropping 2.17% on the day.
The Dow fell 1.58%, the S&P lost 1.31%, and the Nasdaq was the only one that kept its loss under 1.0% with a decline of 0.92%.
All 10 of the main sectors fell on Friday and three saw losses over 2.0%. The energy sector got hit the hardest with a drop of 2.96% while utilities fell 2.6% as the second worst performer. The financial sector lost 2.41% as the third one.
There were only two sectors that managed to keep their losses under 1.0%. The consumer discretionary sector ended up being the top performer with a loss of 0.53% and the tech sector dropped 0.91%.
Despite the big losses, my scans actually produced a positive result on Friday. There were 29 bullish signals generated and nine bearish signals.
The barometer jumped to -3.7 from -17.2 once these results were added in to the calculation.
I wasn’t crazy about two of the three bullish setups that I noticed on the bullish list and only one of the bearish signals stood out. After considering all aspects of the trade, I felt a bullish trade on Kuerig Dr. Pepper (Nasdaq: KDP) would give us the greatest chance at a successful trade. The company’s fundamentals are a little better than average with an EPS rating of 44 and an SMR rating of a B.
The thing that put Keurig Dr. Pepper over the top was the chart. We see how a trend channel has formed and it goes all the way back to last October. The highs and lows fit very nicely in the channel and the stock just hit the lower rail. I’m looking for a move similar to what we saw in March where the stock rallies sharply over the next few weeks.
Buy to open the August 33-strike calls on KDP at $2.15 or better. These options expire on August 20, 2021. I suggest a target gain of 100% and that means the stock will need to reach $37.30. The target is above the high in May, but it won’t need to get anywhere near the upper rail of the channel to hit the target. I suggest a stop at $32.75.
— Rick Pendergraft
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