Stocks were pretty much doomed from the outset on Friday after President Trump’s latest tweet about new tariffs on Mexico. The tariffs are in retaliation for a lack of action on the Mexican government’s part on curbing immigration. Futures dropped immediately on Thursday night and things didn’t improve much from there.
All four indices suffered significant losses on the day and the Nasdaq got the worst hit at 1.51%. The Dow dropped 1.41%, the Russell fell 1.35%, and the S&P declined the least at 1.32%.
[hana-code-insert name=’adsense-article’ /]Nine of the 10 sectors fell on Friday with the utilities sector gaining 0.47% as the only one in the green.The smallest loss, and therefore the second best performance, was from the healthcare sector with a decline of 0.72%.
All of the other sectors fell at least one percent.
The worst performance was from the energy sector which declined 1.76%.
The tech sector fell 1.67% as the second worst performer and the communication services sector dropped 1.55% as the third worst.
My scans remained positive with 41 bullish signals and three bearish signals.
Once again this is due to the number of stocks that are in oversold territory based on the daily indicators.
The barometer inched up to 46.2 from 44 after these results were added in.
Because of the oversold levels, a great number of the trade ideas of late have been bullish ones. In order to get some balance in the trade ideas, I looked to the weekly charts to find a bearish scenario. American International Group (NYSE: AIG) caught my attention for several reasons and one of them was the poor fundamentals. The company gets a 34 on the EPS rating and an E on the SMR rating.
What we see on the chart is that the stock hit its 104-week moving average while in overbought territory. The stock turned lower in the past week and the weekly stochastic readings made a bearish crossover as a result. We see back in 2017 that the 104-week acted as support on a couple of occasions before falling below the trend line in early 2018.
Buy to open the July 52.50-strike puts on AIG at $2.65 or better. These options expire on July 19. In order for these options to double the stock will need to fall to $47.20. The 52-week moving average is right at $47.50 currently, so we will want to be aware of that potential support. I suggest a target gain of 100% with a stop at $52.00.
— Rick Pendergraft
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