The post-election rally continued yesterday, sort of. A clear shift in assets has initiated as investors and fund managers are now moving allocations from profitable technology that has been rallying for the last year over to more industrial and material names. All the while, the dividend trade continues to unwind before our eyes as yields continue to climb higher.
Today’s big three stock charts looks at the post-earnings charts of Walt Disney Co (NYSE:DIS), Nvidia Corporation (NASDAQ:NVDA) and J C Penney Company Inc (NYSE:JCP) after their recent earnings reports.
Walt Disney Co (DIS)
The Mouse House disappointed on its earnings reports, falling short on the top and bottom line as ESPN and other entities continue to contribute less while the company is on a spending spree buying production companies and films. Everything is good though, as DIS CEO Bob Iger soothed investors after a report with forecasts that ESPN would see stronger days soon.
Disney shares traded lower initially and are now trading 2% higher this morning. The spike in DIS shares should run into immediate resistance out of the gate from a few technical indicators.
First, Disney shares will reach into overbought territory immediately per the RSI indicator on the chart. This is because DIS stock has seen a “buy the rumor” rally ahead of earnings. Watch for the overbought condition to weigh on shares in the short-term.
Second, Disney stock opened the day above the top Bollinger Band. While this does have the potential to turn DIS stock more bullish, we must wait a day or two to see if the shares immediately retrace back to the boundaries of the Bands. If so, the shares are likely to target lower prices as the “sell the news” crowd takes over Disney’s tape.
Nvidia Corporation (NVDA)
One of our favorite tech stocks, Nvidia, reported earnings after the close. The company had a blockbuster quarter and outlook resulting in an 18% rally in the pre-market trading. In early morning trading, NVDA is up 24%. Nvidia stock was already up more than 150% for the year as one of the strongest stocks in the S&P 500.
Shares will see some selling pressure as traders take profits, but there should be more to come from this semiconductor company.
Short interest on NVDA is registering at nine times the average daily volume, indicating that a short squeeze is likely to move shares higher.
Similarly, the analyst ranking on Nvidia stock has been relatively low, telling us that we may see some upgrades on yet another good quarter of earnings.
For now, the 18% gains overnight are likely to bring some sellers into the crown, but buying any dip in NVDA shares has been a winning proposition for the last year.
J C Penney Company Inc (JCP)
They did it again: JCPenney came out with another positive report, when the Street thought that they would lay an egg. The trend in retail is moving from the computer screen back to the brick and mortar lately per the results in JCP earnings. This is something to keep an eye on.
The JCPenney earnings beat came after the stock had seen a significant slide ahead of earnings. This suggests that the JCP crowd was steering clear of the discount retailer, a move that they will now be reversing by turning into buyers of the stock.
Yesterday’s rally did run into some resistance in the form of JCPenney’s top Bollinger Band and the stock’s 200-day moving average, which is trending higher and its 50-day, which is trending lower. The resistance signals that we are likely to see an opportunity to buy JCP stock on a slight dip.
Trendlines on JCPenney indicate that despite the recent slide, shares have been improving on a longer-term basis with the 200-day trending higher. A break above that trendline will start the process of shifting the 50-day into an ascent, which will add bullish fuel to JCP stock.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
