Markets are climbing higher today, and that’s helped give this morning’s stocks to watch a decidedly bullish feel.
Today’s three big charts are Microsoft Corporation (MSFT), Fortinet Inc (FTNT) and PepsiCo, Inc. (PEP). Here’s why.
PepsiCo, Inc. (PEP)
Pepsi stock is trading into a breakout today on better-than-expected earnings results. The stock’s chart has spent the last few days wrestling with chart resistance at the $106 level, but today’s earnings results look to provide a catalyst for shares to finally break through this resistance.
While shares of PEP are nearing an overbought condition as indicated by its short-term RSI readings that are nearing 70, it is important to remember that momentum trades and breakouts can go from overbought to “more overbought” easily.
In other words, don’t let one technical indicator get you in or out of a trade.
Adding to the upside potential for Pepsi shares is the fact that the analyst community is likely to add some upgrades to the stock, fueling some additional buying. This is one of a minority of companies within the S&P 500 that is trading with low volatility with strong intermediate- and long-term trends that remain friendly to investors.
Fortinet Inc (FTNT)
Fortinet shares just completed a bullish “Golden Cross” pattern as the 50-day moving average of the shares crossed above the longer 200-day moving average. Typically, technical traders stay alert for these patterns, as they indicate the establishment of a longer-term bullish trend.
Conveniently, the timing of the Golden Cross comes at the same time that Fortinet shares have seen a sharp pullback of as much as 10% over the last two weeks, pushing the stock price near short-term oversold indications. This means that traders may be able to jump on this longer-term opportunity at short-term values.
Fortinet shares should see some technical resistance as they try to cross back above the $33 from the confluence of their 50- and 200-day moving averages, but after crossing above this hurdle, the shares should excel. The last Golden Cross on Fortinet shares was in 2014, before the stock ran from $21 to more than $50.
Microsoft Corporation (MSFT)
Microsoft shares have been consolidating for more than two months as technical trendlines snag the shares from both declines and bullish breakouts. This looks to change as trends are beginning to improve.
The last five days of trading activity have spent time building a little strength above the shares’ 50-day moving average, which is now starting to turn higher.
Historically, our research shows that a stock like Microsoft is twice as likely to post positive one-day gains when the 50-day is trending higher.
In addition, the company’s shares are preparing to cross above the 200-day moving average. This will give technical buyers the signal that they need to start committing assets to a forming intermediate-term bullish trend just ahead of earnings, which have been positive for the company over the last two years.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
