Stock futures are now flat in premarket trading as the S&P 500 and other major indices have given up some ground over the last few days. The flagging of the markets has a lot of investors looking harder for opportunities at the stock level, which is the right strategy as we head into the end-of-the-month trading.
Today’s technical scan give us one bull and two bears to position in our portfolios, Fiserv Inc. (NASDAQ:FISV), Salesforce.com, Inc. (NYSE:CRM) and Baker Hughes Incorporated (NYSE:BHI).
Fiserv Inc. (FISV)
This electronic payments company has been in a very long-term bullish pattern with one of the smoothest monthly trends that you can find in the S&P 500 that took Fiserv from $25 to $110 in the last five years. Year-to-date, Fiserv is outpacing the market, returning more than 12% against the 8% of the S&P 500.
Short-term, Fiserv has seen some selling pressure after the company had an in-line earnings report. The selling brought shares from their all-time highs over $111 to the current $102.78, a decline of almost 10%. This move has opened a short-term bullish trading opportunity for this long-term performer.
The charts show support in two ways. First, the sharp decline in shares has forced Fiserv into a technically oversold situation, suggesting that the selling pressure has likely been exhausted. We haven’t seen an oversold reading like this since January 16, 2016 when the stock started a rally that shot it from $87 to $100.
Second, shares are bouncing off of the $102 level. This has been identified as chart support before as Fiserv shares have found support at this price twice since May. In addition, the $102 price was resistance prior to May, strengthening the case that the $102 level should hold shares.
If $102 doesn’t hold, Fiserv shares have the benefit of their 200-day moving average sitting just below $100 as another source of technical support.
Either way we look at it, the chart suggests that the downside on Fiserv is limited to $100 while the upside is open back to the $111.
Salesforce.com, Inc. (CRM)
Salesforce shares have been consolidating in a tightening range since May — a range that now looks ready to squeeze the shares lower.
The bottom of this range has been around the $76 level while the top has dropped from $84 in May to $82 in July. Typically, a pattern of lower highs is not good for a stock. The $76 level has held sellers at bay twice. Yesterday, the stock fell to this price, but there’s more pressure for the $76 level to hold this time around.
While $76 has been the bottom of the range, it is also now the site of Salesforce stock’s 200-day moving average. This is one of the more widely watched trendlines by technicians. A break below $76 would now not only mean that shares had broken through the bottom of the range, but also that they had broken below the 200-day, which will bring more technical sellers into the market.
Given the chart, a move below $76 will set Salesforce up for a 10% decline to $68 with potential for negative momentum to continue the drop to more secure technical support at $60.
Baker Hughes Incorporated (BHI)
Oil prices are hovering close to the $50 level and the rally has paid off for the Oil and Energy stocks. That said, the easy money appears to have been made trading this sector and it may be time to take some profits or even short a few names.
Baker Hughes is among our short-term technical bears for a few reasons.
First, Baker Hughes shares just made a rapid run to try to break through their top Bollinger Band. It appears now, that the band is going to hold, signaling that the stock is more likely to regress back to its mean patter, which targets a move to $47.
Second, as is normal, a fast and furious rally usually takes stocks into technically overbought territory and Baker Hughes shares are no different. The current RSI reading of 71.4 is unmatched for oversold readings over the last year. The closest was on June 6, just before the shares declined $50 to $45 and then after a short rally from $45 to $42.
Momentum is still very strong for Baker Hughes shares, which means that we would consider a decline of 10% as a potential buying opportunity, especially if it were accompanied by an oversold reading from its RSI. We will monitor for this, but for now, Baker Hughes is a stock that traders should consider taking profits from as a decline appears imminent.
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
