The market is starting to writhe around at the top of the range again, giving traders that uneasy feeling that we’re setting up for another round-trip to the bottom of the trading range or worse.
Today’s three big charts highlights one bull, Allstate Corp (NYSE:ALL), and two bears, JPMorgan Chase & Co. (NYSE:JPM) and Alcoa Inc (AA).
Here’s why:
Alcoa Inc (AA)
AA stock is starting to show signs of technical cracking, just as it heads into the start of earnings season. The company is set to announce its quarterly earnings results on Monday after the market close. The expectation is for a quarter likely to make investors grumble, and it appears AA stock is already on the move to price in some negative results.
Alcoa shares have been trading in a tight range, like a coiled spring, since the beginning of May, indicating that there is likely a lot of kinetic energy ready to fuel a rapid move in the shares after the earnings news hits the tape.
Technically, the shares have a lot going against them. First, shares are trading in a bear market trend as shares are trading below their declining 20-month trendline. This will put a lid on any rally with resistance at the $10.90 level. Second, a bad earnings release will likely pressure the shares through the $9 level, which would be a significant technical break of the bottom of Alcoa’s range, a bad move for those long the stock.
JPMorgan Chase & Co. (JPM)
Since calling the “Dimon Bottom” in February, JPMorgan Chase & Co. has been the canary in the coalmine representing the financial sector.
Unfortunately, that bid looks ready to fly lower as shares have moved back into bear market territory and are threatening to form a “death cross” over the next week, as the 50-day trendline prepares to cross below the 200-day.
The completion of this pattern should target lower prices as momentum traders follow the signs that are pointing to a re-test of the Dimon Bottom, still more than 12% lower than Tuesday’s close. The $58 level will be key in trying to hold back the selling pressure as this marks the April bottom that JPMorgan Chase & Co. shares were able to rally from. Failure to hold this mark will target $56 quickly.
Allstate Corp (ALL)
ALL stock is the lone bull in our charts today. The company is one of those that potentially benefits from lower and higher interest rates as they have done a great job of managing their investment portfolios like others in the insurance sector.
Technically, Allstate has been a great relative strength leader in the market and just made a move to breakout into a new trend that is likely to target another move higher.
Starting last week, Allstate shares surged above the $68 level on heavy volume. This move marked a successful break above what had been resistance previously. At the same time, the rally has broken the upper Bollinger band for Allstate’s shares, which ALL has so far held above. This is indicative of a higher likelihood that the rally will continue to move higher on increased volume.
Allstate does not release earnings until the beginning of August, so it is not likely to see too much “noise” to slow its move.
Technical traders should consider the next round of resistance to come as the stock breaks into new high territory just under $75. A break above this level would only draw more bulls into this name and likely target even higher prices.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
