Stocks made another lurch higher yesterday, though the trend is still undetermined from a short-term perspective. We’re noting that the options market is seeing more put activity as it appears that traders are beginning to hedge themselves for the potential of lower prices.
News that Twitter Inc’s (NYSE:TWTR) suitors appear to be dropping out of the game has affected the market negatively as overseas markets are also adding some pressure to the equation. Today’s Three Big Stock Charts looks at Tesla Motors Inc. (NASDAQ:TSLA), Nvidia Corporation (NASDAQ:NVDA) and Smith & Wesson Holding Corp (NASDAQ:SWHC).
Tesla Motors Inc (TSLA)
Goldman Sachs issued a downgrade on Tesla shares this morning as they took the stock from a buy to neutral rating. TSLA shares are trading 3% lower on the news, just above $200, but the technicals are what are concerning to us.
The last three trading days have seen Tesla shares try to move above the 50- and 200-day moving averages, a confluence of resistance that we pointed out in this column last week. The rejection and now reversal of TSLA shares from this resistance will increase the number of technical sellers in the market almost immediately.
Additionally, Tesla stock is set to break through the $200 level, round-numbered support and potentially move below the $190 level, which will extend the trend of lower lows and lower highs that has been in place since TSLA shares peaked in April.
Follow the technical leads here and reduce or stay away from Tesla stock for now, as we are likely to see fundamentals questioned, resulting in a potential technical target of $180.
Nvidia Corporation (NVDA)
Anyone that follows this column knows that Nvidia has long been one of our tech name favorites. NVDA stock has been a relative strength leader in the semiconductor space, while not attracting the attention of bullish investors. This means that Nvidia stock has been climbing the Wall of Worry.
NVDA shares are trading lower today as the stock is retreating from a technical short-term overbought signal. We’ve seen an 8% rally in Nvidia, while the rest of the market has traded flat, so some profit taking should be expected.
Most of the overbought signals have resulted in flat performance for NVDA stock, but the stock is more likely to take a deeper swing lower with broader market indices looking to decline. Technical support for Nvidia stock should begin to kick in at $64.45.
The second line of support for NVDA shares will fall into place at the $62 level, which would be a great “value” price for this technical leader as we continue into the seasonally strong fourth quarter.
Smith & Wesson Holding Corp (SWHC)
After declining nearly 20% from its recent highs, Smith & Wesson shares are taking technical shape as an intermediate-term buy. SWHC shares sold-off on downgrades and profit-taking as the stock has been a strong “trender” and relative strength leader.
Shares of Smith & Wesson are rallying now from their 200-day moving average, which sits just above $25. SWHC stock is also rallying from an oversold reading from its RSI a little more than a week ago. The combination of these two indicators match the situation that we saw in June as the shares prepared for a rally of more than 40% after the company’s earnings release.
Smith & Wesson shares saw a downgrade this morning, which has shares testing the 200-day moving average again. A successful hold of this trendline will get the technical traders buying SWHC again and likely begin the next move towards highs.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
