After the second quarter GDP numbers came in better than expected, stocks moved higher on Friday. All four of the main indices gained ground with the Russell (1.12%) and Nasdaq (1.11%) both gaining over 1.o%. The S&P had a solid gain of 0.74% while the Dow (0.19%) lagged the other indices rather significantly.
Eight of the 10 main sectors moved higher on Friday and they were led by the communications services sector which gained 2.86%. Twitter beat on its revenue numbers and its user forecast and jumped almost 9% on the day. That helped the sector tremendously.
[hana-code-insert name=’adsense-article’ /]Consumer staples moved up 1.12% and the financial sector jumped 1.09% as the only other sectors to gain over 1.o%.The energy sector was the worst performer on the day with a decline of 0.51% and the industrial sector dropped 0.22% as the only other sector in the red.
My scans were negatively skewed once again on Friday with 43 names on the bearish side and 22 on the bullish side.
The barometer dropped from 17.2 to 0.9 once these results were added in to the equation.
The indicator has seen positive readings for four straight nights, but is in danger of falling back in to negative territory.
There were a number of stocks on both sides of aisle that were of interest, but in the end I found a bullish trade on the Utilities Select Sector SPDR (NYSE: XLU) to be the best option. The fund got a bullish signal from the Tickeron Trend Prediction Engine on Thursday and previous predictions have been successful 90% of the time.
Looking at the chart we see that the fund has been trending higher within a channel over the last four months. The fund hit the lower rail of the channel in the latter part of the week and now looks poised to move higher again. The 50-day moving average is just above the lower rail and should provide a second layer of support.
Buy to open the September 59-strike calls on XLU at $1.95 or better. These options expire on September 20.In order for these options to double the fund will need to reach $62.90. Based on the moves the fund made in May and June, a similar move this time around would put the XLU near the $63 area. I suggest a target gain of 100% with a stop at $59.25.
— Rick Pendergraft
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