The recent trading pattern that we've seen following a gap-down open on trade-war worries has been an immediate bounce, but not enough buying energy to take the indices back into positive territory. There's underlying support that prevents downside momentum, but not sufficient dip-buying interest to produce the V-shaped bounces that the bulls used to love so much.
The indices are off of their early lows as I write this, but still have substantial losses for the day. Breadth is also very weak at almost 3-to-1 negative. We've lost the small-cap momentum lately, and that's what's really hurting breadth.
The poor breadth is reflected in my trading screens that show those stocks that are up on increased volume. There's not even have one page of such names right now, and none of them are at intraday highs. In fact, only a dozen or so stocks are up 5% or more.
The best-looking trading group right now is the small oil stocks, but even those have thinned out after a few days of strong action. There are also a few biotech names making an effort to turn, but that's sparse, too. My Shark Technical Buy for Tuesday morning has been Marinus Pharmaceuticals (MRNS) , which is coming out of a "cup-and-handle" formation.
As for the FAANG names, they're looking OK, and they should be the first to show relative strength if the market's bounce continues to pick up.
One bigger-cap name that's making headlines Tuesday morning is Pfizer (PFE) , which announced plans to reorganize into three primary business lines next year. PFE also said that it's going to suspend drug-price increase that went into effect July 1 and will keep them on hold there until President Donald Trump unveils his plan to strengthen the U.S. health-care system. Other pharmaceutical stocks are trading lower in response to this move. PFE is down 14 cents at $37.29 as I write this.
Fundamentally speaking, Pfizer hasn't had any revenue growth over the past years. The stock sells with a trailing price-to-earnings ratio of 14, with earnings per share expected to rise 11% this year and another 4% in 2019. Drug-price pressures are likely to remain a headwind, so substantial growth remains unlikely in the near term.
Technically speaking, the stock has been in a trading range recently, with support around $36. It attempted to breakout over the past two weeks, but now it's resting. It might not be easy for Pfizer to regain that momentum. The stock is likely to provide steady earnings and will have limited downside, but PFE doesn't have enough revenue growth to put it on the high-growth list.