Stocks are finally seeing some selling as the stronger U.S. dollar and geopolitical concerns are now placing some pressure on investors right ahead of a critical earnings season.
The S&P 500 made a move that should have traders thinking about protecting gains as it cleanly broke below the 2,140 level, a support mark that had held true as the market continues to consolidate, seemingly without a care for direction.
As expected, the FOMC is having an effect on stocks as the rising rate environment strengthens the dollar, but this isn’t bad news for all as there are some technical trends that are still playing out in Metlife Inc (NYSE:MET), Apple Inc. (NASDAQ:AAPL) and the SPDR S&P Biotech (NYSEARCA:XBI) exchange-traded fund that are worthy or watching for the next opportunity.
Metlife Inc (MET)
Insurance companies are one of the groups that will see a direct, positive impact from the next interest rate hike as their balance sheets will get a boost from higher rates. Met shares have gone a bit parabolic of late as outside investors are taking large stakes in the insurer.
Last week, shares of Metlife broke above their top Bollinger Band on heavy volume. The shares have extended themselves into an overbought condition, but the momentum of the move is likely to offset this condition and allow MET stock to continue its rally.
Metlife has been one of the laggards in the insurance sector, meaning that the stock may get a chance to catch up as investors buy the shares not only on the news, but also on the interpretation that it may be undervalued.
A short rest is likely with a potential consolidation at the $46 level, but the charts are indicating that MET shares are going to continue their aggressive move higher.
Apple Inc. (AAPL)
OK, let me start with a full disclosure. I have a tendency to not like AAPL stock. From a technical perspective, we tend to nail the short-term moves on Apple. In general, the company has its issues with innovation, but the products are still leading in market shares. That said…
Apple tried to break into a rally yesterday on the news that Samsung (OTCMKTS:SSNLF) is discontinuing the sales of the Galaxy Note 7. This gave Apple shares a shove above the top Bollinger Band, which was quickly reversed.
In addition, the shares are touching up on an overbought signal, according to the short-term RSI readings. This, as always, suggests that AAPL stock is getting into the territory where it has extended itself too far too quickly and a pullback should be expected. Before everyone barks off about another bear calling for a pullback, this type of pullback is healthy for the stock, not the end of the world, relax!
The $115 level does provide some historic chart resistance and support, so it’s not going to be unexpected to see the shares try to move back to this level, especially ahead of a heavy week of earnings for technology stocks coming up.
In short, Apple’s chart suggests that we will see the shares make a move to the $110 level over the short-term, which would likely be a good buying opportunity for some exposure ahead of their next earnings report set for October 25.
SPDR S&P Biotech (XBI)
One of the more volatile sectors around right now has been the Biotechnology stocks by proxy of the SPDR S&P Biotech ETF. This group has writhed around in ranges that traders have loved because of its sensitivity to the technical trendlines and indicators. This is why yesterday’s move should grab attention.
The XBI tested and broke through its 50-day moving average on relatively heavy volume yesterday. This is the first break below the telltale trendline that is the most widely monitored, since July.
The fact that the Biotech ETF has garnered 40% gains to its highs since June against the S&P 500 gains of about 9% puts it high on the radar for traders to lock in profits adding to downside volatility.
Yesterday’s decline was halted at the ETF’s lower Bollinger Band ($62.85), which will be a line in the sand for the next two days. Should XBI follow another day of selling to breach this level, then the volume will rise as the share prices fall. There’s a downside target of $60 for the next round of support, followed by $57 as the next, resulting from the ETF’s 200-day moving average.
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
