Today’s market is taking stocks higher as investors are taking some comfort in the possibility that the election decision has been somewhat determined as well as the feeling that higher interest rates aren’t a lock just yet.
The bullish sentiment has us looking at a few stocks that are presenting short-term trading opportunities for the bulls. In each of these cases, the stocks are rebounding from recent sell-offs or technically significant bullish moves. The short-term bulls include Honeywell International Inc. (NYSE:HON), Gap Inc (NYSE:GPS) and Travelers Companies Inc (NYSE:TRV).
Honeywell International Inc. (HON)
Honeywell shares took a beating last week on announcement that the Q3 and Q4 expectations were being lowered. HON shares plummeted almost 10% at their lows on Friday before technical buyers came in to dabble with the oversold stock.
Honeywell faces two scenarios that are both likely to play out. First, the oversold condition that was created on Friday: The sudden surge lower caused a historically unusual move that put HON shares into oversold territory. Short-term traders are likely to step in this week and grab a quick two to three day trade that may net 5% or so as the dead cat bounces.
This will lead to the next move lower for Honeywell. As of Friday, 81% of the analysts with an opinion on HON stock ranked it a buy. The dead cat bounce is going to give these analysts the opportunity to downgrade and lower their price targets, which will lead to a longer period of selling pressure.
Honeywell found support at its 20-month moving average on Friday, which currently sits at $106.36. This will be the key trendline for technicians to watch in the coming weeks. A move below will target the $90 level for the next line of support.
Gap Inc (GPS)
Gap shareholders were given an early holiday shopping gift last week when the company announced better than “feared” (feared has been used by the media) month-over-month sales results. The surprise popped GPS shares 17% on incredibly heavy volume.
Gap is one of the retailers that appear to be grinding it out as the shares are trading 10% higher against the retail sector, which is only 2.5% higher. The long technical battle in GPS shares has them transitioning into an intermediate-term bullish pattern at the right time, when seasonality is the strongest for the retailers.
Friday’s move broke Gap shares above their 50-day moving average, which has been transitioning into a bullish pattern. The move also created a short-term overbought signal for GPS that is likely to see shares move lower towards $25 as some profit-taking plays out.
Bullish traders are likely to watch and act on support at $25 over the next two weeks as a potential launching pad for Gap shares to continue their move that may turn parabolic for a short time as the stock has broken outside of its upper Bollinger Band. GPS stock is a technical leader in the retail sector.
Travelers Companies Inc (TRV)
The development of Hurricane Matthew over the last few weeks has caused traders to back away from many of the insurers that deal with property, Travelers being one of them. The recent weakness in TRV is part of an intermediate-term trend that has now brought Travelers’ shares to a critical support level that may provide a bullish catalyst.
Last week, TRV traded below its 200-day moving average for the first time since June. The move was met by some technical buying and also some buying on the reports that storm damage may not be as extensive as initially forecasted.
Today, Travelers shares are moving back towards their mean for the last three months and look ready to continue their move higher as an oversold signal from TRV’s RSI should help fuel the buying.
Overhead resistance is still strong, indicating that Travelers is more for the traders in the group that are willing to swing back out after a 3% to 5% gain. For now, the technical ceiling for TRV stock is the $118 price point. While this stock is a good short-term trade, many more companies within the sector offer better longer-term trading opportunities.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
