Stocks were under pressure once again on Tuesday only this time the Nasdaq and Russell both turned higher after a big drop in the morning. Both would still finish in the red with the Nasdaq dropping 0.09% and the Russell losing 0.26%, but both were down over 1% in the morning.
The Dow would finish with the worst loss at 1.36% while the S&P fell 0.87%.
Nine of the 10 main sectors fell on the day with only the materials sector (+0.33%) posting a gain. The communication services sector only fell 0.29% and the tech sector dropped a modest 0.30% as the second and third best performers.
The energy sector tumbled 2.57% as the worst performing sector and it was followed by the financial sector which fell 1.77%. There were six sectors that saw declines of over 1.0%.
My scans produced another negative result last night, but they weren’t as negatively skewed as Monday night. There were 86 bearish signals and 46 bullish signals.
The barometer dropped a little farther in to negative territory at -33.7, down from -17.2 the previous night.
For the second straight day I have a bearish play from the energy sector for you. APA Corporation (Nasdaq: APA) appeared on the bearish list and it has poor fundamentals. The EPS rating is 37 and the SMR rating is an E. APA Corporation is in the exploration and production industry where yesterday’s recommendation was from the oil services industry.
The pattern APA formed on the chart in the last two days is known as an island top or an abandon-baby top. The candle from Monday was a gap higher with a shooting star pattern to it and the follow through from yesterday was a gap lower, creating gaps on both sides of the candle. This pattern is a bearish signal.
Buy to open the July 22.50-strike puts on APA at $3.10 or better. These options expire on July 16, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $17.07 in order to reach our target. The stock was below the $17 level in mid-April, so it won’t have to break to a new low. I recommend a stop at $22.50.
— Rick Pendergraft
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