Thursday’s action from the indices was dictated a great deal by the earnings reports of various companies. Microsoft beat estimates and moved higher on the day and that also helped lift the software sector as a whole. 3M missed estimates and lowered forecasts and that hurt industrials and the Dow. This led to mixed results from the indices.
The Nasdaq led the way on Thursday with a move of 0.81% and it was joined in positive territory by the S&P which gained 0.19%. The Russell fell 0.15% as the worst performer and the Dow dropped 0.11%.
[hana-code-insert name=’adsense-article’ /]The sectors were evenly split on the day and there were big discrepancies between the results.On the plus side, the tech sector jumped 1.46% on the day and was far and away the top performer on the day.
The utilities sector was the second best performer with a gain of 0.36%.
Twitter hurt the communication services sector as the stock dropped over 20% and the sector dropped 1.17%.
The healthcare sector fell 0.57% and that was the second worst performance.
Both of my scans produced pretty sizable lists on Thursday.
There were 23 names from the bullish scan and 66 from the bearish scan. There were 18 tech stocks on the bullish list while the bearish list was littered with stocks from three sectors—financial, industrial, and consumer discretionary.
The barometer didn’t change much after these results were added in, dropping to -34.6 from -34.3.
After the various earnings reports came out last night with Amazon missing and Intel beating, it was a tough choice on which way the market may head today. After looking at all of the charts on both lists, I decided today’s trade idea would be on a stock we have traded before—American Airlines (NYSE: AAL). The company reported earnings yesterday and it moved up after the report, but it still only gets a 39 on the EPS rating and a B on the SMR rating scale.
The weekly chart shows the downward trend better than the daily chart at this point. We see how the stock has been moving lower over the past year and it is now at the upper rail of the downward sloped channel. The daily stochastic readings are in overbought territory and made a bearish crossover last night.
Buy to open the December 31-strike puts on AAL at $2.41 or better. These options expire on December 20. In order for these options to double the stock will need to drop to $26.18. We see on the chart that the last two downswings have dropped the stock below the $25 level so it won’t need to break to a new low. I suggest a target gain of 100% with a stop at $30.50.
— Rick Pendergraft
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