It was another wishy-washy day for stocks on Tuesday. Three of the four main indices opened modestly higher and one opened lower. The Russell would spend most of the day in positive territory, but a bout of selling hit in the afternoon and that took the small-cap index in to negative territory. It would finish with a gain of 0.14%.
The Nasdaq opened higher, but dropped in to negative territory almost immediately and would finish with the worst loss at 0.34%. The S&P fell 0.02% and was the only other one to end with a decline.
The Dow opened lower and then rallied to move in to positive territory, but a late selloff dropped it back in to negative territory and it would eventually finish with a gain of 0.01%.
Investors appeared to be nervous about the big earnings reports that were due out after the closing bell.
Seven of the 10 sectors dropped on Tuesday and most of the losses were minor. The utilities sector fell 0.77% and the healthcare sector dropped 0.55%. All the other losses were less than 0.5%.
The energy sector led the way with a gain of 1.21% and it was followed by the industrial sector with a gain of 0.83%. The financial sector rallied 0.79% as the third sector that moved higher.
My scans turned in a second straight negative result last night with 15 bearish signals and 10 bullish signals.
The barometer dropped once again, this time from 18.1 to 8.1.
Of the 25 stocks and ETFs that got signals from my scans last night, only three stood out as possible trade ideas. There were two on the bullish list and one on the bearish list. After four straight bullish trade ideas, I decided on a bearish idea for today. Exelixis (Nasdaq: EXEL) appeared on the bearish list, but its fundamentals aren’t all that bad. The EPS rating is 56 and the SMR rating is a B. However, the chart suggests the stock is due for a downturn.
Yesterday’s candle formed a bearish engulfing pattern and it comes at a time when the stock is overbought. Both the stochastics and the RSI were in overbought territory before yesterday’s decline. The stochastic indicators performed a bearish crossover and the RSI dropped out of overbought territory. The last few times we have seen this setup, the stock has dropped in the weeks that followed.
Buy to open the June 26-strike puts on EXEL at $2.85 or better. These options expire on June 18, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $21.00. The stock was down below $21 back in March, so it isn’t an unreachable target. I suggest a stop at $25.70.
— Rick Pendergraft
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