While earnings continue to take most the headlines, we’re seeing a lot of chart movement that is based off good-old technical and price action. A review of the earnings calendar does show that we’ll see about 30% of the S&P 500 companies drop their earnings results on the market over the next seven days, but the real action is being seen in the companies that are reporting further out than this window.
The old “Buy the Rumor” appears to be in effect and ready to move Cisco Systems, Inc. (NASDAQ:CSCO) and Nvidia Corporation (NASDAQ:NVDA) are both seeing the benefits of this now while AK Steel Holding Corporation (NYSE:AKS) is seeing the opposite as chart watchers have their fingers on the sell button based on a level we’ll take a closer look at in today’s three big stock charts.
Cisco Systems, Inc. (CSCO)
Cisco Systems is still reaping the benefits of an analyst upgrade from Last Thursday as the shares are now moving to hold above their 50-day in preparation for a chart challenge that will be well-watched.
We’ve seen almost a 5% move in shares of the networking giant as CSCO stock bounced from an oversold signal right into a potentially bullish trend that could take the stock higher.
The bullish outlook was improved by the move above Cisco’s 50-day, which had already been trending higher. We are seeing a little selling pressure as the stock hovers above this key trendline, but the pricing appears to be strengthened in the face of the stock’s next challenge.
The $35-level served as a strong consolidation and resistance level from the chart perspective in February and March after CSCO provided better than expected earnings results. The $35-mark is once again starting to show some signs of resistance as we are seeing some short-term selling pressure as the stock reaches this price.
Earnings for Cisco aren’t until May 17, so we are expecting to see some “buying of the rumor” to help the stock break above $35 and make a run to the next target price of $40.
Nvidia Corporation (NVDA)
We’ve not checked in on Nvidia, one of our favorite stocks from a charting perspective, for quite some time now. The activity in NVDA shares has been quiet lately, which is why it hasn’t been on the list, but that is likely to change soon.
Nvidia shares are starting to see another transition in their 50-day moving average. The type that normally results in a large move in the stock.
Last week, the shares made a move above the 50- and 100-day moving averages on somewhat light volume. However, we are assuming that volume will pick-up a bit now with the shares popping back above the 50-day. This indicates that the technical crowd is beginning to gravitate towards this leader.
Earnings are coming up on May 9, and NVDA’s earnings have been market movers in the past. We’re expecting that more analysts will notice next Tuesday circled on their calendar for this event and make sure that they have added some long positions ahead of the earnings date.
Shares are reaching towards a slightly overbought condition, which tells us that we could see a little selling, but this is one stock that usually finds itself well above overbought readings initially after earnings. In other words, overbought tends to become more overbought on Nvidia.
Watch for a hold at $105 to signal a target of $115 to $120 for NVDA.
AK Steel Holding Corporation (AKS)
The steel stocks got hit extremely hard from United States Steel Corporation’s (NYSE:X) earnings last week. Among them, smaller steel company AK Steel. The technical slam delivered to the stock now has it trading at critical support.
AKS stock, which had been leading the market and its sector higher, has now turned into a single-digit laggard that is getting ready to break through critical chart support.
That charts support lies at the $6-mark, while the stock is trading at a current price of $6.20. This level serves as resistance for AK Steel multiple times through 2015 and 2016, then serving as a launching pad for the stock in November 2016. Now, with AKS shares looking to slump lower, the chart traders will see a break below $6 the signal to get the rest of the risk assets out.
The stock is extremely oversold, which may help with some short-term support, but political headlines and the softening on China as a trade partner are pressuring steel and other products that flow from China, a pressure that is not likely to subside quickly as it appears that we are headed towards business as usual with China.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
