The market’s rebound has afforded some stocks that had been in bearish patterns a break from selling pressure, but the return of uncertainty and earnings season looks like it may stop lifting all of the boats in the harbor. Among those at risk of reverting back to their intermediate-term trends are Tesla Motors Inc (NASDAQ:TSLA), Gap Inc (NYSE:GPS) and CVS Health Corp (NYSE:CVS).
Tesla Motors Inc (TSLA)
Market favorite Tesla has rallied based on the market’s strength and a number of what appear to be marketing stunts by CEO Elan Musk.
Cryptic messages and comment from the CEO/investor sent the stock buzzing higher last week, but delays in production and other questions about the actual operations of Tesla have longer-term investors starting to waver.
Tesla shares have run from $190 to $225 on its latest rally, but the rally has lost steam lately with earning on the horizon. The stock’s three main trendlines (20-, 50- and 200-day) are directly below current levels, meaning that a move below 15 will be met with an increase in selling volume, as this is a heavily traded stock by the technicians.
Gap Inc (NYSE:GPS)
Retailers have struggled through the last year, and GPS shares are down more than three times that of the exchange-traded fund SPDR S&P Retail ETF (XRT). The struggling company has shot from $18 to $23 since May, but some overhead trendline resistance and the historical chart show that its time for Gap shares to ease back towards $18 again.
The resistance comes from the declining 200-day trendline that sits at $24.60. Now, with the stock trading lower the traders may think that there’s still the potential to pocket another $1 before things reverse, but there’s another problem.
Gap shares’ RSI is ringing all kinds of alarms with its current reading of 81 (over 70 is considered overbought). The last time the stock was this overbought was in March, just before shares tumbled from $30 to $24.
In other words, don’t get greedy looking for that extra dollar.
CVS Health Corp (CVS)
Health care and retail company CVS just made a great run from $92 to $98, and if the technical play out as they should it’s time to either lock in those profits or short the stock as a reversal appears to be in the cards.
CVS has been stuck in a pattern of lower highs and lower lows for more than the last six months and is also trading in a technical bear market trend as the shares are below their 20-month moving average.
On a shorter-term basis, the CVS share price is trading right at the intersection of its 200- and 50-day moving averages, both of which are trending lower. This adds some significant pressure to the shares at the $98 price point.
Those looking for a breakout in the stock will want to wait to see three trading days above this price before starting to feel a little comfortable, but the technical odds are that sellers will start to take control of CVS stock shortly and trade it back down towards $92 or lower.
As of this writing, The Johnson Research Group did not hold a position in any of the aforementioned securities.
