Our modeling of the current earnings season is showing that the clear majority of stocks, on average, are losing 3.3% after beating their earnings estimates. In the cases where stocks are rallying, they are averaging a performance of 1.1% a week later. That data tells us that the market is taking every opportunity to sell into strength as we enter one of the weakest seasonality periods for stocks, the month of August.
As a result of the selling pressure, there are a growing number of stocks that are facing make-or-break situations as they approach technical trendline tests. Today’s three big stock charts look at the charts for Amazon.com, Inc. (NASDAQ:AMZN), FireEye Inc (NASDAQ:FEYE) and Micron Technology, Inc. (NASDAQ:MU) as each of these companies are facing tests from their technicals.
Amazon.com, Inc. (AMZN)
Considered one of the crown jewels of the Nasdaq for the last few years, Amazon.com shares are now taking it on the chin as the stock has given-up more than 8% from its post-earnings spike. Is the stock a buy/hold or sell at this point? Let’s look at the chart.
- We’re used to seeing some “sell the news” reaction to AMZN’s earnings report every quarter as investors tend to hype the company ahead of the report. The latest 8% decline is among the larger moves, which has longer-term traders thinking twice about buying this dip.
- The post-earnings selling has taken Amazon shares to their 50-day moving average. This trendline continues to move higher, giving the stock an intermediate-term bullish outlook. The last two tests of the 50-day saw successful rallies and we expect the same reaction here.
- AMZN shares are nearing oversold readings, indicating that the odds for a dead cat bounce are increasing. In addition, the stock has a bevy of other trendlines. Failure of the $1000-level would target a strong buy price of $950.
FireEye Inc (FEYE)
FireEye shares have been struggling to consolidate between $15 and $16 since mid-May. Recent price action is indicating that the market may have tired of the stock’s lack of direction as we’re seeing additional pressure as shares approach the lower-end of the range and a must-win test.
Is it time to buy?
- After spending the last three months trading in a range, FEYE stock is now breaking through the lower end of the range with some increase in volume. This has bearish implications.
- Momentum, according to the MACD for FireEye stock, is heading into negative territory as the trend in moving averages are beginning to shift into bearish patterns. On this note, the 50-day moving average for FEYE shares is rolling over which will tag the stock with an intermediate-term bearish outlook.
- FireEye’s RSI readings are nearing an oversold reading which would normally suggest some short-term buying. In this case, we expect the overall trend in the stock to override that signal resulting in nothing more than a dead cat bounce.
Micron Technology, Inc. (MU)
Micron Technology shares have slipped into a bearish pattern after their earnings announcement in late June. MU stock is showing some signs that we could see a short-term rally, but the overall intermediate-term trend is not favorable for the bulls.
Let’s take a look at what the chart is telling you to do.
- Micron Technology shares are lagging the strongly performing semiconductor sector as the stock is now breaking through key technical support. This will increase selling pressure from both the technical and money management crowds.
- Yesterday, MU stock broke through its 100-day moving average for the first time since January 2015. The break of this critical technical sent Micron Technology shares into a bear market that ultimately saw the stock shed more than 60% before bottoming.
- Micron Technology shares are hitting technically oversold readings, but there’s a catch. The newly formed pattern of lower highs and lower lows indicates that this oversold reading will only provide a chance for strength sellers to get out of the shares, sending them lower. Bottom line is that Micron is better left alone for now.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
