For the second straight day three of the four main indices moved higher and for the second straight day it was the Russell (-0.22%) that was in negative territory. The Nasdaq spent a great deal of the day in the red, but it moved in to positive territory late in the day and finished with a gain of 0.53%. The Dow led the indices with a gain of 0.71% and the S&P added 0.61%.
All 10 of the sectors moved higher on Thursday with four of them gaining over one percent on the day. The energy sector led the way with a gain of 1.85%. The materials sector tacked on 1.19% as the second best performer.
[hana-code-insert name=’adsense-article’ /]The industrial sector finished with the smallest gain at 0.17% and the financial sector gained 0.37% as the second worst performer.My scans saw a huge drop in bullish readings yesterday with only nine names on the bullish list and two on the bearish list.
The barometer fell from 68.6 to 43.9 after these results were added in to the equation.
With the limited number of names on either list, I went back to the bullish list from the night before for today’s trade idea.
Kuerig Dr Pepper (NYSE: KDP) actually appeared on the bullish list on Wednesday, but I liked the setup for the bearish play on the EWZ better at that time. The company’s fundamental ratings are mixed with a 40 on the EPS rating scale and an A on the SMR rating. Earnings were declining over the last three years, but recovered in the most recent quarter and grew by 56%.
The daily chart shows how the stock has formed a trend channel over the last three months. The lower rail is formed by connecting the lows from February and April while the upper rail connects the highs from March and May. The stock has pulled back in the last few weeks and that has brought the stock down to the bottom part of the channel. It didn’t quite reach the lower rail of the channel, but the stochastic readings hit oversold territory and they have now made a bullish crossover.
Buy to open the July 27-strike calls on KDP at $1.85 or better. These options expire on July 19. In order for these options to double the stock will need to reach $30.70. I suggest a target gain of 100% with a stop at $27.50.
— Rick Pendergraft
[hana-code-insert name=’oxford 2′ /]