Don’t expect much from the market over the next 24 hours as investors are going to spend the day finding a comfortable seat to watch the Federal Open Market Committee meeting results before making any real moves. Despite the likely lack of activity, shares of Chesapeake Energy Corporation (NYSE:CHK), Apple Inc. (NASDAQ:AAPL) and Twitter Inc (NYSE:TWTR) are each presenting charts with actionable patterns, with or without the drama from the FOMC.
Chesapeake Energy Corporation (CHK)
News that Carl Icahn has reduced his holdings in CHK stock will certainly reverberate through the price chart over the next week or so as the market, and others riding his coat tails, decide whether to sell or hold.
Chesapeake shares are trading a healthy 91% higher since the beginning of June, which in most investors’ books sounds the “cash in profits” alarm. The technical picture helps support that outcome as well.
Shares of CHK are coming off a short-term overbought situation after the last rally pushed share prices to the $8 mark. This technical situation is in the process of unwinding now and will result in additional selling pressure, as there are usually a lack of buyers when a stock becomes overbought.
From a longer-term perspective, the technicians were all over Chesapeake as a stock that was likely to see some resistance as shares had just encroached their 20-month moving average, currently at $7.81. This is the line between a bull and bear market for a stock from the technical view, meaning that we should see resistance at that price point.
Our analysis of the chart sees a high likelihood that the recent news will cause a reversion back to the $5.75 level where short- and intermediate-term support should help to buoy shares and offer the bullish traders their chance to take CHK for a trade.
Twitter Inc (TWTR)
Twitter shares have turned into a favorite for the technical traders lately as TWTR stock has followed the trends and indicators making it more tradable than ever.
After a convincing 50% run from $14 to $21, it was a given that Twitter shares would have to take a rest as their indicators suggested repeatedly that TWTR stock was overbought. Recently, the stock made a very healthy consolidation at the $18 to $19 range, preparing for the next move.
Technical traders are going to have to watch this move develop patiently as the next 10% to 20% move will be determined by one of two indications.
First, the bullish move: Twitter shares have the potential for another rally to $21 as long as the shares don’t succumb to a move back below their 200-day moving average and $18. A move below $18 will signal that you need to be patient. We’re keeping a close eye on the 50-day moving average, currently at $18.36. More than two or three closes below this key moving average will have us on the sidelines as TWTR bulls.
The bearish move comes on a break below $18 and the stocks’ 200-day moving average, currently at $17.77. In that case, we will expect to see Twitter shares move to a target of $16 before becoming a bullish bounce candidate.
Apple Inc. (AAPL)
People will be sending us comments immediately about suggesting Apple as a bearish trade right now, but let’s face it, AAPL stock doesn’t go up all of the time, right? The technicals are suggesting that there is room for Apple shares to move lower right now, so why not make some lemonade from the lemons.
After what has so far been a successful launch of their newest phone and iOs, AAPL shares rallied 12% over five days. Take the name Apple out of the equation, and almost every technician would be looking at this as an opportunity to short a company that is overbought. Enter the chart.
Apple shares have indeed shot into overbought territory over the last few days, but honestly, AAPL has a tendency to hang out in overbought territory when it gets there as the bandwagon investors keep piling into the shares after a rally.
What attracts us to this chart as a reversion play is the precipitous drop in volume, signaling that we’re not likely to see the buying power necessary to hold Apple shares in their current rarified air since it appears that the market used all of its firepower to rocket AAPL stock to its current overbought condition.
Those of us in need of additional proof should look to the long-term chart of Apple; specifically, the 20-month moving average, which is hovering at $111.90. This is the line between the bull and bear market for the stock and will likely flex its resistance muscle over the next week to bring some sellers into the mix.
For now, the jury is out on whether AAPL is ready to make a long-term move higher, but the short-term charts suggest that traders should cash in on their quick profits and keep their powder dry for the next opportunity, as we could see $100 shares of Apple as a bargain over the next few weeks.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
