There is still much confusion in the market as traders and investors alike prepare for earnings season. The season “officially” kicks off today with the announcement by Alcoa Inc (NYSE:AA), which disappointed the Street’s expectations. Things really get started next week when the S&P 500 starts to see a healthy flow of earnings results.
Although some may not think it, earnings season is actually a better time to monitor the technicals for traders. Despite the feeling that earnings drive price moves, its actually more true that the technicals tend to take over almost immediately after earnings are announced, meaning the technical traders find great opportunities during the season. Today, our big stock charts take aim on non-earnings related moves with Mylan NV (NASDAQ:MYL), Tyson Foods, Inc. (NYSE:TSN) and United States Oil Fund LP (ETF) (NYSEARCA:USO).
Mylan NV (MYL)
It’s a nice start for Mylan, but the EpiPen finish line is still a way off. Yesterday, MYL stock surged as the company announced that it had settled claims related to the misclassification of the EpiPen used in the Medicaid rebate program. Mylan is paying $465 million to resolve all liability claims by federal and state governments. This, of course gets some of the EpiPen drama out of the way, but Mylan stock is still facing technical hurdles.
Yesterday’s 8% surge is offering the technical traders that were purchasing MYL stock last week an opportunity to lock in some profits, and probably not much more. Mylan shares are wrestling with the 20-day trendline, which has been a trigger trendline for sellers of late when the stock has rallied.
Yesterday’s bounce also ripped MYL shares out of their previously oversold situation, meaning another day or two of rallying would put Mylan stock into overbought territory. The quick whip from one extreme to another will get technical sellers moving quickly.
On a stretch, MYL shares could have room to run to the $43 level, where the 50-day moving average is descending rapidly, but more likely, we will see traders keep the stock below the $40 mark, which is also chart and round-numbered resistance.
Tyson Foods, Inc. (TSN)
After taking a dive on last week’s allegations of price fixing, Tyson shares tipped down to touch their 200-day moving average for the first time in a year. TSN stock was immediately defended by the analyst community on Friday and Saturday, making the bounce off of the 200-day even more attractive.
After bouncing from the 200-day, Tyson shares have already taken over the round-numbered $70 level and are still emerged in a technically oversold condition that is likely to fuel the move back towards $75.
Yesterday’s move in TSN shares also brought them back within the boundaries of their Bollinger Bands, signaling that the downside move has likely been contained and that the “buy the dippers” are going to have some technical backing on the recovery as the one-day drop for Tyson is likely just that, one day.
Technical traders will eye TSN as a good recovery candidate with a high likelihood of the stock moving back to the $75 mark where technical resistance does exist.
United States Oil Fund LP (ETF) (USO)
The move on crude oil is obviously more than a short-term pop, but there are signs that the range is likely to start playing out more heavily on the top-end as resistance should build.
Headline news has helped the move in oil, and United States Oil Fund shares to continue their trek higher after a great intermediate-term signal we covered on Sept. 28. Now, USO is heading towards a showdown with potential resistance worth preparing for if you’ve been long.
United States Oil Fund shares have now taken out their August highs as the trends become more supportive of the longer-term outlook for higher oil prices. That said, we should expect some profit taking on USO, as the share price crosses above the $12.00 to $12.50 range.
The reason for the profit taking would center on the combination of June highs for the United States Oil Fund, which are just below $12.50 and the pending overbought condition that the ETF will find itself in as a result of this relatively aggressive rally from $10 to $12 in less than a month.
Technical traders will likely start thinking about trailing stop loss strategies to lock-in gains, which could result in a self-fulfilling sell-off after USO shares have touched-up on $12, something that we’re watching closely. The signature of this reversal will be an increase in daily volume along with lower price moves, signaling that the short-term “long oil” trade is done.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
