Stocks made a charge higher on Tuesday as the major indices found staunch support at their respective 50-day moving averages, signaling that the technical trade is in full play ahead of the start of earnings season.
Today’s three big stock charts look at three stocks trying to mount a rally themselves. Shares of Netflix, Inc. (NASDAQ:NFLX), Morgan Stanley (NYSE:MS) and Dunkin Brands Group Inc (NASDAQ:DNKN) are each in the process of breaking back into bullish trading trends.
Netflix, Inc. (NFLX)
Online streaming giant Netflix has been consolidating in a relatively tight range since mid-January as the stock has wandered sideways within a 6% channel. The consolidation has allowed the 50-day moving average to creep just below current prices as NFLX continues to rise bullishly.
We’ve seen Netflix shares bounce from their 50-day each of the last four trading sessions, strengthening the resolve of the trendline and now pushing shares back to the top of their range.
The next few sessions will be key for NFLX. Due to the subdued volatility over the last two months, the stock is more likely to see a volatility rally higher if shares post a close or two above $146, which has been the top of the range.
The Top Bollinger Band for Netflix is also at $146.43. A break above this band will add to the positive volatility picture for NFLX.
Finally, Netflix is slated to announce their earnings on April 14 after the close. It is very common for the stock to see a “buy the rumor” rally ahead of its announcements. This adds to the short-term bullish prospects for NFLX stock.
Morgan Stanley (MS)
Financials saw the brunt of the selling pressure in March as the market adjusted to the potential for a less aggressive Federal Reserve. Morgan Stanley, along with many of its peers, saw its shares test intermediate-term support with some degree of success.
Monday’s selling took MS shares below their 100-day moving average for the first time since July 2016 when the stock initiated a long-term rally. Today, the shares will wrestle with this same trendline, trying to maintain a price above $42.95.
In addition to the 100-day, Morgan Stanley stock is coming off of an oversold reading from its RSI. This is the first time that the indicator has registered a short-term buy signal since June of 2016 ahead of a strong move higher.
Finally, the $43-level serves as “chart support” for MS. As we look back at Morgan Stanley’s chart, the stock found significant resistance at this price from December through January. Typically, resistance levels like this turn to support once the stock rallies above them. In this case, a move back above $43 will strengthen the argument that Morgan Stanley has put in an intermediate-term bottom.
Dunkin Brands Group Inc (DNKN)
Dunkin Brand shares are in the process of trying to stick to a perfect test of their 50-day moving average this morning. DNKN stock is currently trading 2% lower and has already “tested” the trendline on an intraday basis. Currently, this trendline sits at $53.99, but we’ll just round up to $54. The move from just a week ago accounts for nearly 8% in losses for Dunkin stock since the announcement that the company’s CFO will be leaving.
Looking to January, DNKN shares failed to hold their 50-day moving average on a sharp decline, but quickly rebounded after the stock hit both the 100-day moving average and an oversold signal from its RSI. A similar situation could be brewing here.
The 100-day for Dunkin stock sits at $53.12, about another 2% from today’s lows. A move here would trigger support from the 100-day as well as bring DNKN stock into oversold territory. As a kicker, the stock will have seen a rough 10% correction from its highs, triggering many to “buy the dip”.
For now, Dunkin shares appear to be in the hands of the technical traders with the 50-day looking strong. The additional backup combination of the 100-day and potentially oversold signal should serve as comfort for traders as well.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
