Stocks were split on Wednesday and that led to a split in the performances of the indices. The Russell dropped 0.95% on the day and it was the only one that finished in the red.
The S&P led the way with a gain of 0.34% and it was followed by the Dow with a move of 0.30%. The Nasdaq waffled back and forth from positive to negative territory all day, but it finished with a gain of 0.01%.
Seven of the 10 main sectors moved higher on the day with the materials sector jumping 1.04% as the leading sector. The industrial sector gained 1.0% to finish in second place.
The energy sector was the worst performer once again and this time it was a loss of 1.63%. The communication services sector fell 0.15% as the second worst performer and the consumer discretionary sector dropped 0.06% as the only other one to lose ground.
My scans turned in another negative result last night with 26 bearish signals and 21 bullish signals.
The barometer inched a little lower and came very close to a completely neutral reading with the final figure being 0.4. Tuesday’s reading was 1.2, so the last three readings have been pretty neutral.
I was really looking for a bearish trade setup after three straight bullish ideas, but I just didn’t like any of the bearish setups as well as I did several of the bullish ones. In the end I felt like a bullish trade on the iShares MSCI EAFE ETF (NYSE: EFA) would give us the best odds of success. The fund got a recent bullish signal from Tickeron’s AI trend prediction tool and that signal showed an 89% chance of it moving higher over the next month.
We see how a trend channel has formed on the daily chart and it goes back to the middle of December. The fund just hit the lower rail of the channel and it seems to be finding support at the 50-day moving average. The ETF has rallied over 7.0% in each of the instances where it hit the lower rail in December, January, March, and May.
Buy to open the September 77-strike calls on EFA at $3.50 or better. These options expire on September 17, 2021. I suggest a target gain of 100% and that means the fund will need to reach $84.00. A move to that level would mean a gain of just under 7% from Tuesday’s low, so in line with the gains we have seen during the current trend. I suggest a stop at $76.75.
— Rick Pendergraft
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