Trade of the Day: JetBlue (JBLU)

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Our index indicators continue to give bullish readings, unchanged from a week ago. In the short term, the bullishness is supported by secondary indicators and also the calendar. Next week is the first week of a new month, which is generally bullish. But in the longer term, September and October are historically not good months for stocks. Nevertheless, the indexes will remain bullish as long as they remain above their 50-day moving averages. For the Dow Industrials, that level is currently at 16,840, for the S&P 500, 1,960, and for the Nasdaq, 4,430.

As we mentioned, our internal indicators are confirming the bullish trends on the indexes, as the 200-day Moving Averages Index, Advance/Decline Index and Cumulative Volume Index are all in bullish positions. And all nine major S&P sector funds are in bullish trends, unchanged from last week. Maybe the only fly in the bullish ointment is that some volatility indexes have drifted higher over the past few days.

Treasury bonds (TLT) have resumed their surge higher, as has the U.S. dollar. Some might point to the strength in these two “safe havens” as additional flies in the bullish ointment for stocks. And we agree that, if geopolitical trouble eventually causes problems for financial assets, stocks and indexes will fall long before Treasuries. Meanwhile, TLT continues to defy those expecting higher interest rates and will remain bullish by staying above $115. The U.S. dollar stays bullish as long as it is above $21.70. And for those seeking yield in a low-yield world, junk bonds are also maintaining their bullish trend.

When the dollar is strong, commodities are generally weak, and that is the case right now. Copper has fallen below key short-term support and is about to test support at its 200-day average. Oil has arrested a downfall that began in late June and for the time being is trying to mount a recovery, but remains in a bearish trend. Gold has also been strong the past few days, but its bearish trend also continues. Geopolitics is most likely the reason for the current mini-rebounds in oil and gold.

With stock indexes maintaining their momentum, options traders should continue to weight more toward bullish positions. But, as the calendar moves into September and October, increasing caution should be the watchword. That and the current strength in Treasury bonds and the dollar are good reasons to also hold some puts in your portfolio.

Ahead of the increased travel for the long Labor Day holiday weekend in the United States, my system has identified a short-term bullish opportunity in airliner Jet Blue (JBLU) and an undervalued-call option to go with it.

Buy the JBLUE Dec 13 Call options at 75 cents or less.  JBLU stock closed at $12.41 Thursday. After entry, take profits if the stock price hits $13.500 or the option price hits $1.40. Exit if JBLU stock price closes below $11.80.

A reminder that U.S. markets are closed on Monday, Sept. 1, so we’ll be back with the next Trade of the Day on Tuesday, Sept. 2.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/08/jblu-indexes/.

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