3 Big Chart Stocks for Thursday: SPDR S&P 500 ETF Trust (SPY), General Electric Company (GE) and Salesforce.com, inc. (CRM)

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Despite an incredibly boring market, traders are starting to engage stocks as we head into September in what appears to be a move to batten down the hatches ahead of a volatility trade that almost everyone sees coming.

The charts for the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), Salesforce.com, inc. (NYSE:CRM) and General Electric Company (NYSE:GE) each give us views of stocks that are setting up for potentially rough September trading.

SPDR S&P 500 ETF Trust (SPY)

160901 SPY Stock Price
Source: Chart courtesy of StockCharts.com

SPY is the ETF proxy for the S&P 500 Index, which means that its technicals are widely watched by traders as an indication of where the market is headed. Recently, there have been some cautious signs that are alerting traders that the September volatility that everyone is fearing really is on the horizon.

First, after spending more than a month consolidating in a tight range, the SPY shares are now drifting lower to challenge the lower end of the range. The standout here is the increase in volume ahead of the holiday weekend. Usually, we see a significant drop in volume ahead of the Labor Day weekend, literally to some of the lowest levels of the summer. This week, volume on the SPY has increased, as the shares test the critical $217 level that coincides with 2,170 on the S&P 500.

A break below this consolidation range on increasing volume will immediately target the $214.50 level for the SPY shares as the next level of support, but there’s more.

If you’re watching the SPY, then you also need to be watching the CBOE Volatility Index, a.k.a “Fear Gauge”.  VIX is making an attempt at a rally, which is bearish for the short-term SPY traders. Yesterday’s trading saw the VIX stopped cold and hard at its 50-day moving average at $13.60. This is the fourth day of five that the VIX has been held from moving higher by this trendline.

160901 VIX Stock Price
Source: Chart courtesy of StockCharts.com

We haven’t seen a break above the 50-day by VIX since June 9, 2016, ahead of a selloff that lasted 13 days to the tune of a 6% loss on the S&P 500. This is the most important indication that traders should be watching over the next week.  A close above VIX’s 50-day trendline will result in a short-term correction in the S&P 500.

Salesforce.com, inc. (CRM)

160901 CRM Stock Price
Source: Chart courtesy of StockCharts.com

We covered salesforce last week as a stock with more downside potential than upside. Today, shares of the CRM are running into one of the technical barriers that we indicated should reverse the shares lower.

Yesterday, for the fifth trading day in a row, salesforce shares failed to close above their 50-day moving average, which is in a declining pattern itself. CRM shares saw heavy volume on yesterday’s failure, indicating that the short-term traders are giving-up this time around and closing out any profits before the stock follows a familiar pattern lower.

Since May, CRM shares have been drawing a defined pattern of lower highs and lower lows of which the latest attempt to move above $80 appears to be ready to join the ranks of.

Momentum on salesforce shares has started to reverse and yesterday’s spike in selling volume is likely to draw more sellers into the mix today.

There is a convenient target for support for CRM shares. As of now, the lower Bollinger Band and salesforce shares’ 200-day moving average have merged at $76. This will build a formidable level of support that is likely to offer short-term bulls an opportunity to trade salesforce’s increasingly predictable range for short-term gains.

Watch for a move to $76 on the market’s weakness and the technical selling that appears to be teeing-up on CRM stock.

General Electric Company (NYSE:GE)

160901 GE1 Stock Price
Source: Chart courtesy of StockCharts.com

General Electric is another company that has spent much of the summer in a state of consolidation, so much so that GE stock has turned into what we like to refer to as a kinetic energy trade. The recent sideways activity in General Electric stock has caused the Bollinger Bands to tighten their range on the shares so much that the bands themselves are now predicting a monster move for GE stock.

Not since July 2015 have the Bollinger Bands tightened their grip on GE shares this much, and even then, the bands weren’t this tight. In that circumstance, GE finally saw the increase in volatility that the narrow bands were forecasting, which took the shares from $26.50 to $22.00.

Adding to GE stock’s potential pressure is the fact that the stock’s shorter 20-day moving average just crossed below its 50-day moving average. Our quantified results of this pattern show a distinct downside tendency for the shares when this happens as it often indicates a shift in intermediate-term trends.

Finally, from a longer-term perspective, GE is trying desperately to stay above its 20-month moving average. This is why the stock has found significant support at the $31.25 level for the last month. A break below this level will put GS shares back into a technical bear market bringing with it an increase in selling pressure. For now, the charts aren’t kind for GE stock’s outlook.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/09/3-big-chart-stocks-for-thursday-spdr-sp-500-etf-trust-spy-general-electric-company-ge-and-salesforce-com-inc-crm/.

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