Wednesday was an interesting day for stocks. The Fed ended its two-day meeting and cut the target rate by 25-basis points as expected. The unexpected part was that the FOMC changed to a more hawkish stance about future rate cuts. This did not please President Trump, but it did please investors for some reason.
All four of the main indices were sharply lower after the rate cut announcement, but they rallied during Chairman Powell’s press conference. The Dow (+0.13%) and S&P (+0.03%) managed to make it to positive territory at the end of the day.
[hana-code-insert name=’adsense-article’ /]The Nasdaq trimmed its loss to only 0.11% after being down over 1%.The Russell fell 0.63% and was the biggest laggard, but even it trimmed its loss in the final hour.
Six of the 10 sectors moved lower on Wednesday while four moved higher.
The utilities sector led the way with a gain of 0.42% and it was in positive territory almost the entire day.
The financial sector gained 0.35% and that was good enough for second place.
The energy sector fell 0.48% for the worst performance of the day.
Oil prices fell once again as most of Saudi Arabia’s oil production is already back online. The industrial sector took the second biggest loss at 0.15%.
My scans returned to producing negative results on Wednesday, but it wasn’t a big negative skew. There were 15 names on the bearish list and eight on the bullish side.
The barometer continued to climb, but remains in negative territory. The final reading on the day was -22.5, up from -42.2.
After two straight bullish trade ideas, I have a bearish one for you today. Box, Inc. (NYSE: BOX) was on the bearish list and its fundamental ratings are mixed with an EPS rating of 66, but an SMR rating of a D. The company has been losing money and therefore the profit margin is negative and so is the return on equity. There was also a bearish signal from the Tickeron Trend Prediction Engine and 82% of previous predictions have been successful.
What jumped out at me on the chart was the similarity in the current pattern to what we saw back in February. The stock gapped higher, continued higher for a few more days before consolidating for about a week and a half. The stochastic readings remained in overbought territory for an extended period before the stock gapped sharply lower. We have seen all the same things this time around except for the gap lower—so far.
Buy to open the December 18-strike puts on BOX at $1.90 or better. These options expire on December 20. In order for these options to double the stock will need to drop to $14.20. The stock won’t have to break to a new low to hit our target, but it will have to fill the recent gap and then some. I suggest a target gain of 100% with a stop at $18.20.
— Rick Pendergraft
[hana-code-insert name=’MMPress’ /]