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My indicators are giving bullish readings this week, and I’m interpreting that as a pretty good buying signal.
Part of the reason for the rally this week was that there were a lot of hedging positions taken prior to the French election, and when that seemed to resolve itself positively over the weekend, traders started to unwind those hedges.
Also, the CBOE Volatility Index (INDEXCBOE:VIX) dropped dramatically on Monday — about 25% in a day — and that is a signal that this rally should continue. To see such a big one-day drop is a very bullish sign. This tells me that a lot of fear has just gone out of the market this week, and the positioning of the VIX really reduces the chances of any kind of a major decline at this point in time.
Looking at the charts, a lot of stocks are breaking out to the upside, which is another bullish sign. Additionally, the market tends to rise during the last few days of the month and into the first few days of the new month, and we’re approaching that time again now, so we should get a bullish bias over the next week or so.
As such, I’m recommending a call trade today, on industrial stock Trex Company Inc (NYSE:TREX).
Buy to open the TREX Jun 85 calls (TREX170616C00085000) at $0.95 or lower.
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