Stocks look to start their climb higher this morning, though just slightly. All three of the major indices touched-up on their respective 50-day moving averages during trading yesterday to find some support. This is the first time that technicals have had to step in as support since December.
The next two days will determine success or failure, so traders will spend their days trading both sides of the market for the rest of the week to see how this first test of 2017 plays out.
Today’s three big stock charts looks at the price musings of United Parcel Service, Inc. (NYSE:UPS), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Amgen, Inc. (NASDAQ:AMGN) as three stocks that are facing similarly critical tests of their technical standings.
United Parcel Service, Inc. (UPS)
The logistics/delivery company has been locked in a trading range since its disappointing earnings report dropped the shares by more than 10%. Now, after several tests of what has turned into critical chart support, UPS shares are testing $104 for support again.
The level ($104) can be tracked back to April and May of 2016 as a significant support level, which is why the traders are keying some buying off it now.
The touch of $104 comes while UPS shares are touching down on oversold readings from the stock’s RSI. This indicates that the flow of selling pressure is likely to ebb and fewer buyers will be needed to change the momentum for the short-term.
A break below $104 will target another 4% to 5% decline in the shares as $100 is the next clear line of support. According to our model, the stock remains in the short- and intermediate-term bearish category given the technical breakdowns and the declining 50-day moving average.
Alphabet Inc (GOOGL)
Alphabet shares have snapped lower over the last week and now reside in a technical “rock and hard place” situation.
GOOGL stock sold out of an overbought situation as it hit $875 right through its first level of support drawn by its 50-day moving average at $843. Friday and Monday’s additional selling pressure dropped Alphabet stock to test its 100-day moving average at $825. This is the second time that GOOGL shares have fallen against this trendline for support in as many months.
Traders need to keep an eye on the trend of the 50-day moving average on Alphabet stock as it appears to be transitioning from a bullish ascending pattern to a neutral and potentially bearish declining trend. This will have a negative implication on the price target for GOOGL shares over the short-term outlook.
For now, maintain an eye on $820, which represents the stock’s 100-day moving average. A break below this will see Alphabet move into that short-term bearish pattern with an initial price target of $800.
Amgen, Inc. (AMGN)
Amgen shares continue to recover from the news that their newest cholesterol drug, Repatha, didn’t trial as well as expected. AMGN stock has shed about 12% since that news took shares downs.
It appears that much of the selling has been squeezed out of the market as the stock is landing close to technical support levels that should help to build a case for short-term bulls.
First, Amgen shares entered an oversold position last week on the decline below $170. This called for a likely short-term bounce, which has yet to be seen.
Second, while AMGN shares could slice through their 50-day moving averages, the stock still has two important technical lifelines.
The 200-day moving average for Amgen shares is trading at $161 indicating potential support. This same price level has seen significant price support and resistance over the last six months, strengthening the argument that we will see buyers enter the market at this price.
Finally, AMGN’s 100-day moving average, which just transitioned into a bullish pattern itself, is bringing support at $157 in case Amgen can crack through $161.
Bottom line for technical traders is that the headline effect of Repatha is likely wearing off and the technicals, which remains bullish, should bring AMGN stock back into its intermediate-term bullish climb.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
