All four of the main indices were lower in the morning yesterday, but all four rallied to close in positive territory. The ongoing trade dispute with China and the U.S. caused the losses in the morning, but investors shrugged those concerns off.
The Nasdaq led the way with a gain of 0.61% and it was followed by the Dow with a gain of 0.44%. The S&P notched a gain of 0.37% and the Russell lagged the others with a gain of 0.05%.
[hana-code-insert name=’adsense-article’ /]Despite the overwhelming positive moves by the indices, only six of the 10 sectors moved higher on Tuesday.The top performing sector was the energy sector with a gain of 0.95%.
The tech sector was the second leading performer with a move of 0.85%.
The consumer staples sector was the worst performer with a loss of 0.37% and it was followed by the utilities sector with a loss of 0.26%.
My scans moved to a decidedly bullish skew on Tuesday with 82 names on the bullish list and only six on the bearish list.
This moved the barometer to 32.2 from 1.7.
Of all the stocks on the bullish list, there was one in particular that stood out for a combination of its chart, its fundamentals, and the option pricing. That stock is Energen (NYSE: EGN) and it is the subject of today’s trade idea. The company has an EPS rating of 76 and an SMR rating of a B.
Energen has formed a trend channel over the past seven months and the stock just hit the lower rail of the channel. The stochastics just made a bullish crossover out of oversold territory like they did at the beginning of June, the beginning of May, and the original point of the channel in February. After those three instances, the stock jumped anywhere from 17.25% to 26% in the following weeks.
Buy to open the Oct18 $72.50-strike calls on EGN at $4.20 or better. These options expire on October 19. For these options, to double, the stock will need to move to $80.90 and that is a gain of 15% from the low yesterday. I suggest a target gain of 100% with a stop at $70.25.
— Rick Pendergraft
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