2013 has already been an outstanding year for the stock market, but a few stock charts are flashing signals for those who haven’t checked out yet. And what are they saying?
That traders still have a few opportunities to close the year out with a bang.
The stock charts of five midcap stocks and one ETF stand out for their potential to provide some beta in the holiday season. Here’s a look at each:
Southwestern Energy (SWN)
Click to Enlarge One of the most interesting charts right now belongs to Southwestern Energy (SWN), which is making yet another attempt to get through the $39-$40 range that has served as resistance all year. SWN trades with a very high sensitivity to natural gas prices, so this isn’t necessarily a stock that can generate its own momentum.
On the other hand, those looking to play continued gains in the commodity can use Southwestern to pick up some extra bang for their buck.
Click to Enlarge Investors in Altera (ALTR) have been frustrated by its inability to make any headway through this bull market, but the stock is nearing the point where traders have a chance to make money on the short side. ALTR is closing in on long-standing support at $30, below which the shares last traded in 2010.
With no recent volume to prop up Altera underneath this $30 level, a breakdown is likely to lead to a quick, meaningful decline as the stock moves through this air pocket.
Mead Johnson Nutrition (MJN)
Click to Enlarge Mead Johnson Nutrition (MJN) has already rewarded investors with a 30% gain in 2013, but more upside could be in the cards if the stock can get through its June 2012 high of $88.64.
The stock has been boosted by its role as a conservative consumer-staples play and, more recently, China’s shift on its one-child policy. Earnings estimates are rising, but it should be noted that MJN still has to rise about 5% to get to its breakout level. Also, it’s no longer cheap at 23 times forward earnings. Keep an eye on this one, but tread carefully.
The charts of two ADRs also stand out from the crowd, one for its positive technical setup and another for its flashing caution signal.
InterContinental Hotels Group (IHG)
Click to Enlarge Bulls will find plenty to like in the chart of InterContinental Hotels Group (IHG), which has put in a series of higher lows and is sitting just short of its 52-week high of $31.49.
Luxottica Group (LUX)
Click to Enlarge On the other hand, the technical picture for Italian luxury goods company Luxottica Group (LUX) is looking increasingly shaky.
LUX has traded sideways through a range of $50-$56 since the spring, and it opened Tuesday just above $50. At this level, however, it is now below its 200-day moving average, and technicians also will note that its 50-day moving average is on the verge of crossing below the 200 (the so-called “death cross”). At this point, the stock looks destined to slip to at least $45.
iShares MSCI Japan ETF (EWJ)
Click to Enlarge Finally, the iShares MSCI Japan ETF (EWJ) has reached a crossroads.
EWJ is within striking distance of new high ground above $12.43, but it also needs to fall just 4.5% to cross below its lower trendline.
Japanese equities have benefited from the tailwind of extremely aggressive central bank policy, but this is a double-edged sword. If quantitative easing of this magnitude fails to create sustainable economic growth, investors will question whether there’s anything that can bring the country out of its decades-long doldrums.
Watch the chart to gauge whether this year’s rally has legs, or whether the EWJ rally is about to hit the wall.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.