The breadth of the market’s moves continues to erode as small cap and technology stocks are giving way to lower prices. The move means that there are a growing number of technology companies that are likely to see profit-taking over the next few weeks.
Today’s three big stock charts scan the charts for FireEye Inc (NASDAQ:FEYE), Qualcomm, Inc. (NASDAQ:QCOM) and Tesla Inc (NASDAQ:TSLA), all of which are showing signs that the sellers may take control of these stocks over the short-term to drive prices lower.
FireEye Inc (FEYE)
FireEye rallied more than 20% after a pair of upgrades in the end of March attracted buyers. This buying momentum took the shares to an overbought signal that triggered as the quarter ended, conveniently giving traders a reason to “window dress” by selling into the short-term strength.
Now, after posting yet another in a series of lower highs that started in July of 2016, FEYE stock is headed for a critical test of its 50-day moving average.
The Warm-up for that trendline test will be an almost equally important test of round-numbered support at $12 for FireEye shares. This price served as staunch resistance for FEYE shares in February and March, which means we should see some buying at $12.
Failure to hold $12 over the next week will see FireEye move lower to test $11.65, which is the current 50-day moving average value. This considerably strong support trendline is in a declining pattern, meaning that we don’t expect technicians and program traders to defend it strongly.
Put simply, FireEye bulls may want to get comfortable with the likelihood that the shares still have considerable downside potential. Our models are targeting $10.75.
Qualcomm, Inc. (QCOM)
Pressure from overhead and support just beneath has Qualcomm traders scratching their head, but the technicals are telecasting a direction.
QCOM has been trading in a tight range lately as the stock is finding support from its 50-day moving average. In a positive development, the 50-day is transitioning into a neutral outlook as it emerges from a declining pattern. That said, there are some concerns with Qualcomm.
Namely, QCOM’s long-term status, which is currently bearish. The stock is seeing overhead resistance from its 20-month moving average. Currently, this trendline sits above Qualcomm shares at $56.87 — a price that everyone should be watching as we head into the more volatile earnings season.
In addition, the weekly charts for QCOM show a comparable situation with resistance at $60.75, so either way you cut the charts up, the bears appear to have the advantage.
With Qualcomm stock sitting in no-mans-land in terms of being overbought or oversold, the next move will likely be triggered by a technical break with the most likely of these being the 50-day support. Traders should set their alerts to $56.15 as the make-or-break hold price.
Tesla Inc (TSLA)
Tesla shares have surged after the company released its latest production data and fell into place as the second largest automobile company in the U.S. by market cap. The combined news moved TSLA stock from $250 to $300, a 20% poke.
Tesla stock still appears attractive from a long-term perspective, but traders should expect to see some profit-taking as this is how you generate “alpha” in portfolios.
Sellers started entering the picture on April 2 after TSLA stock crested above the $300-mark. The selling initiated from the round-numbered resistance and a technically overbought signal. The last time that Tesla saw a similar signal was in February before the shares slid from $280 to $250, a perfect 10% correction.
The pullback in the TSLA share price has also brought the end to a bullish volatility rally as shares are now settling back into their Bollinger Band range. This should increase some of the selling pressure on Tesla stock.
Support for TSLA lies at $270 and $265, which would account for another 10% correction and a great re-entry price for those active traders to get back into the shares before the next earnings call, which is just a little less than a month from now.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
