The indices vacillated considerably on Wednesday without really going too far from breakeven. The Nasdaq, Russell, and S&P all started in negative territory, but turned positive in the morning session. The Dow opened in positive territory and stayed there until the afternoon session, turned negative for a short period and then rallied again.
At the end of the day all four of the main indices finished in the black with the S&P leading the way with a gain of 0.28%. The Nasdaq moved up 0.19%, the Dow tacked on 0.17%, and the Russell eked out a gain of 0.04%.
[hana-code-insert name=’adsense-article’ /]Nine of the 10 sectors moved higher on the day with the energy sector experiencing the biggest gain at 0.85%.The communication services sector finished with the second best gain at 0.82%.
Materials stocks moved up 0.68% for third place.
The consumer discretionary sector dropped 0.46% and it was the only sector that finished in the red.
The industrial sector only managed a gain of 0.01% and that was the second worst performance on the day.
Tech stocks also limped along with a gain of a mere 0.09%.
My scans produced another negative result on Wednesday with 30 names on the bearish list and 13 on the bullish side.
The barometer moved up slightly after these results were added in to the equation. The final reading for last night was -34.3, up from -43.5 on Tuesday.
Despite the large discrepancy between the lists sizes, today’s trade idea is a bullish one on Estee Lauder (NYSE: EL). The company scores an 89 on the EPS rating system and an A on the SMR rating scale. Earnings are due out on before the market opens on October 31, so you will want to be aware as that makes this a riskier trade idea.
You can see how the stock has been trending higher over the last nine months. If we connect the lows from May and August we get a trend line that also catches the low from the last few days. The big gap higher in August came after the second quarter earnings report, a similar move this time would make for a huge win on this trade idea.
Buy to open the November 185-strike calls on EL at $7.50 or better. These options expire on November 15. In order for these options to double the stock will need to reach $200. The stock gapped higher by over 8% in August, a similar gap up this time around would put the stock over $202. I suggest a target gain of 100% with a stop at $182.00.
— Rick Pendergraft
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