Stocks came under pressure on Tuesday after retail sales came in below the consensus estimate and PPI came in above the consensus estimate. All four main indices opened lower and not one of them hit positive territory at any point during the day.
The Nasdaq suffered the worst loss at 0.71% and it was the only one that never attempted a rally throughout the day. The Russell made the strongest attempt at making it in to positive territory, but turned lower at the end of the day and finished lower by 0.33%.
The Dow dropped 0.27% and the S&P experienced the smallest loss at 0.20%.
We had another even split from the sectors on Tuesday with five moving higher and five moving lower. The energy sector was by far the biggest mover in either direction with a gain of 2.05%. The industrial sector rallied 0.43% as the second best performer.
The tech sector was the worst performer on the day with a drop of 0.61% and it was followed by the communication services sector with a loss of 0.56%. The consumer discretionary sector was just behind with a decline of 0.55%.
My scans flipped back to a negative result last night, but the difference between the two lists was relatively small. There were 58 bearish signals and 52 bullish signals.
Despite the negative result, the barometer continued its trek higher. Tuesday’s reading came in at -4.6 and that was up from -11.0.
Over the last few weeks, approximately eight trading days, the trade ideas have been pretty well balanced between bullish and bearish trades. With the Fed meeting tomorrow, I felt it was important to try to keep that balance. With that in mind, today’s trade idea is a bullish one and it is on Freeport-McMoRan (NYSE: FCX). The company was on the bullish list and it has good fundamental ratings. The EPS rating is 69 and the SMR rating is a B.
The daily chart shows how the stock has been trending higher over the last nine months, but the last six months show a pretty well-defined trend channel. The low from yesterday connects nicely with the lows from March and January to form the lower rail of the channel. We also see that those two lows were the only times where the stochastic indicators have reached the 2o level in the last six months. In both of those previous instances, the stock rallied rather sharply over the next four or five weeks.
Buy to open the August 35-strike calls on FCX at $4.55 or better. These options expire on August 20, 2021. I suggest a target gain of 100% and that means the stock will need to reach $44.10. The $45 area proofed to be resistance on a couple of occasions in May, but our target is below that price level. I suggest a stop at $35.50.
— Rick Pendergraft
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