The market will start returning to a little more normal trading over the next week as investors look toward the new year. While futures are showing some tepid movement for the S&P 500 this Tuesday, there are a number of technology companies that appear ready to make some moves.
First, Semiconductor company Nvidia Corporation (NASDAQ:NVDA) is starting the short week on a positive note as shares are higher by more than 3.6% in early morning trading. Shares of market favorite Apple Inc. (NASDAQ:AAPL) are reading a technical testing ground as they rally to another must-win situation. Finally, biotechnology company AbbVie Inc (NYSE:ABBV) finds itself in a similar technical test as the biotech sector cools as the year closes.
Nvidia Corporation (NVDA)
Traders appear to be chasing shares of Nvidia higher again as the stock is moving higher out of the gate by more than 3%. The chip maker grabbed the market’s attention in November when it beat earnings estimates and surged by more than 25% and have now continued for another 25% or so.
Short sellers were to blame for the first surge in price as they scrambled to cover their losing bets. Now, the technical momentum is feeding an increase in volume buying as investors try to catch this runaway train of a trade.
Technically, we don’t like the fact that NVDA stock has become overbought, but there’s a catch … Nvidia shares broke above its top Bollinger Band more than a week ago. This break suggests shares are likely to start another rapid run higher as the market plays catch-up. This leads to frenzy buying, which should continue despite overbought conditions.
For now, those already in NVIDIA should sit and enjoy the ride. Those that aren’t may want to wait for a slight pullback but not for too long as we’re likely to see the analyst community upgrade this 244% year-to-date winner.
Apple Inc. (AAPL)
Shares of Apple are running into some technical resistance as the company has continued to lag in the recent rally. The shares are at a familiar technical resistance level as $118 was the point that reversed the strength that the company’s stock did see into October.
Followers of this piece know that one of the more telling technical measures can be the trend of a stock’s 50-day moving average. A rising 50-day trendline is indicative of higher percent odds that a stock will move higher on a day-to-day basis.
Due to the recent trading range on Apple stock, its 50-day moving average has leveled off, indicating that the stock is trading in a technically neutral pattern and not likely to break out until we see a shift in buying patterns.
Overhead, the round number $118 level serves as perfect chart resistance. Failure for the shares to break through this mark will trigger range-bound selling.
Finally, as if there needed to be something else, Apple stock’s RSI is registering overbought readings. Not coincidentally, the last reading was registered in October as shares were facing a reversal. This should add pressure for a pullback to at least the $112.50 level where we will reassess the technical picture.
AbbVie Inc (ABBV)
Another technology company (biotech) that is facing a similar situation as Apple Inc. is Abbvie. Unlike Apple, Abbvie is in a direr situation as the intermediate-term technical picture is painted as bearish according to the trendline analysis. Not helping matters is the fact that the stock is in a sector that is lagging the market and seeing an increase in sellers as investors wonder what uncertainty the new political administration may bring.
The most recent rally has resulted in ABBV stock running into resistance at the 100-day moving average. The same trendline offered resistance in November that continued to draw lower highs and also resulted in another in the series of lower lows.
For now, buying interest in the shares has tapered as volume dried-up over the past two weeks. Some of this may be associated with the lighter year-end trading patterns, but other sectors are seeing more normal volume.
This time around the downside is more dangerous for Abbvie shares as we’re likely to see a reversal in the stock also result in a break of the shares’ 50-day moving average. Such a break will target the $56 level on Abbvie stock as we head into the new year.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
