Geopolitical concerns continue to rattle the market to the point that the S&P 500 is slipping below its 50-day moving average for the first time since November.
The weakness in the market is causing some profit taking in names like Amazon.com, Inc. (NASDAQ:AMZN); however, some bullish opportunities are still presenting themselves to the chart-watchers.
Today’s three bigstock charts look at the potential for profit-taking in AMZN as well as two short-term bullish charts from PepsiCo, Inc. (NYSE:PEP) and a technical favorite of ours, Chesapeake Energy Corporation (NYSE:CHK).
Chesapeake Energy Corporation (CHK)
Chesapeake Energy is getting ready to make a breakout, and the bulls may have it this time.
We talk about CHK stock often as it is one of the most technically sensitive stocks that we’ve seen in the energy sector or the market.
Today, Chesapeake shares start trading between the 200- and 100-day moving averages, which have been both support and resistance for the shares. The volatility of CHK shares is on the rise, indicating that a breakout is almost imminent.
The bullish kicker for Chesapeake stock is the strength of the 200-day, which has recently been presenting itself, and the fact that momentum has been building to the upside.
We’re seeing a little lighter trade on CHK shares this week, but considering the holiday shortened trading, this is not a concern.
Newly released short interest data shows that the short positions account for almost 15% of the float, so a volatility rally will be fueled also by shorts covering position.
Watch for the break above $6.35 to open the stock’s move up to $7.00 and higher.
Amazon.com, Inc. (AMZN)
Amazon has been on a tear as its volatility rally took it all the way to its new highs above $920. The rally, however, resulted in an overbought situation on the trade that now looks to be correcting itself.
Shares of AMZN are now slipping below the $900-level, which will serve as a psychological level for investors. Historically, large numbers, especially those that end in multiple zeros, act as accelerators either lower or higher as investors watch them more closely.
The short sellers have been watching too. Amazon short interest dropped 14% over the last two weeks. This means that the recent rally was driven by short covering. It also suggests that there is less sentiment support for AMZN shares.
Watch for a break below $900 to take Amazon to a more reasonable $850 in the intermediate-term, which is the site of the stock’s 50-day moving average.
PepsiCo, Inc. (PEP)
Pepsi stock is breaking into a volatility rally as the shares get an upgrade from analysts at Susquehanna this morning.
For weeks, PEP stock has been hovering at resistance around $112, gaining some relative strength against the market as the S&P 500 slipped lower. Now, an upgrade is giving Pepsi stock a shot in the arm that is surging into a volatility rally.
This morning’s price move takes PEP shares above their top Bollinger Band for the first time since the stock was trading at $105 ahead of a run to $112.
The move in price also confirms Pepsi stock’s break into new all-time high territory, which is attracting volume buyers.
For now, PEP stock remains a bullish trade from the short-term perspective based on the new highs and volatility breakout. That said, Pepsi shares are becoming one of the most loved companies based on their analyst buy recommendations that are above 90%. Historically, this tends to be an indication that PEP stock is becoming a crowded trade and less likely to continue outpacing the market.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
