Tuesday was an interesting one for stocks as the indices opened considerably higher, pulled back in mid-morning, but then rallied again. They peaked near midday and then fell throughout the afternoon. All four indices were up at least 3% at some point during the day, but three would finish with losses on the day.
The Russell eked out a gain of 0.03% and it was the only one in the black. The Nasdaq fell 0.33% and it was the worst performer of the bunch. The S&P dropped 0.16% and the Dow fell 0.12% to round out the losses.
The main sectors were evenly split on Tuesday with five moving higher and five moving lower.The materials sector gained 2.66% and was the top performer.
The energy sector jumped 2.13% and it was the only other sector to gain over 2.0%.
The utilities sector declined 1.25% and was the worst performer while the consumer staples sector fell 1.1% and was the only other one to lose at least 1.0%.
My scans produced a second straight positive result on Tuesday, but the difference between the two was much smaller.
There were 23 bullish signals and 17 bearish signals.
The barometer inched up to 10.9 from 2.1 after these results were added in to the equation.
After a couple of bullish trade ideas, today’s is a bearish one. Pfizer (NYSE: PFE) was one of the stocks on the bearish list and its fundamentals aren’t terrible, but the technical indicators have been winning out lately. The company scores a 55 on the EPS rating scale and a B on the SMR grading system.
Pfizer barely moved above its 50-day on Monday and opened higher yesterday. The stock turned lower during the day and ended up closing back below the moving average. The body of Tuesday’s candlestick completely covered the candlestick from Monday and that is a bearish engulfing pattern and is a bearish sign. We also see that the stock is overbought and that the stochastic indicators made a bearish crossover.
Buy to open the May 35-strike puts on PFE at $2.60 or better. These options expire on May 15. With the option premiums and volatility high, I suggest a target gain of 75% for this trade. In order to reach that target, the stock will need to drop to $30.45. I suggest a stop at $34.75.
— Rick Pendergraft
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