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Materials Stocks Prove Resilient as Market Loses Footing

Materials Stocks Prove Resilient as Market Loses Footing

The S&P 500 opened higher on Thursday and was looking to continue the bullish momentum it was starting to gain on Wednesday. However, that momentum didn’t hold, and it finished near the low of the session down 1.76%. A surprising twist to this bearish plot was the strength of Materials stocks. The sector was the best performing on the session closing 0.94% lower. One of the top performers was CEMEX, S.A.B. de C.V. (NYSE: CX), which nearly closed at a multi-month high on significant volume.

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  • The materials sector has continued to be a strong performer since the March lows. The strength in the sector has seen a rotation from precious metals companies to more industrial materials companies. At various stages of the rally in industrial materials companies, Cemex has been a top performer.

    The share price of Cemex broke out of a symmetrical triangle after the company’s earnings report on July 27. The company achieved the target price of $3.60 on August 17 before beginning to retrace on August 27.

    The company received an analyst upgrade by HSBC securities from reduce to hold on September 1. The analyst target was maintained at $3.50.

    By Tuesday of this week the price had tested the $3.10 support based on the early June high. The price broke out strongly on Thursday on substantial volume after trading near the support for several days. The 8.70% move is a strong indication that the uptrend is looking to continue its bullish ways.

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  • A price target of $4.10 can be arrived at by using the $1 move from the mid-July low to the resistance in mid-August. That target would carry the price back near the 52-week high.

    Option traders may want to consider buying the 15 JAN 21 $3 call for around $0.80. Consider rolling the option to the $3.50 strike price if the option gains 30-50%.