Thursday saw the indices open with sharp losses yet again—that is the fourth straight day the indices have opened lower this week. Stocks did rally in the afternoon and pared the losses considerably, but all four of the main indices still finished in the red.
The Dow suffered the worst loss at 0.54% and it was followed by the Nasdaq with a drop of 0.41%. The Russell fell 0.31% and the S&P was close behind with a loss of 0.30%.
[hana-code-insert name=’adsense-article’ /]One sector managed to close unchanged on Thursday while the other nine were all lower.The energy sector was the fortunate one to close unchanged.
The worst performance came from the materials sector with a loss of 0.78%.
The tech sector fell 0.68% and that was the second worst performance.
All of the other seven sectors finished with losses between 0.12% and 0.41%.
My scans remained negatively skewed on Thursday with eight names on the bullish list and 12 names on the bearish list.
Even thought the difference between the two lists wasn’t very big, it was enough to move the barometer back in to negative territory with a reading of -3.1.
With the balanced numbers between the two lists, it was a tough decision on today’s trade of the day. In the end the combination of the fundamentals, the technical factors, and the risk/reward relationship led to a bullish idea on Home Depot (NYSE: HD). The company scores a 97 on the EPS rating scales and an A on the SMR rating system.
Home Depot has seen a trend channel form since the December low and the stock is just above the lower rail at this time. The 50-day moving average is in the same vicinity and the stochastic readings just made a bullish crossover. A similar scenario developed in March and the stock rallied from the $180 area to a high above $208.
Buy to open the July $190-strike calls on HD at $10.50 or better. These options expire on July 19. In order for these options to double the stock will need to reach $211. The stock will need to move to a new 52-week high to get to our goal, but it won’t need to reach the upper rail of the channel. I suggest a target of 100% with a stop at $191.25.
— Rick Pendergraft
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