Technical resistance continues to loom over the market and the majority of stocks as earnings season rolls on. Today, we’re taking a look at U.S. Bancorp (NYSE:USB), Celgene Corporation (NASDAQ:CELG) and NRG Energy Inc (NYSE:NRG), as each of these companies are in situation that appear ready to result in short-term selling pressure.
U.S. Bancorp (USB)
U.S. Bancorp has been caught in a trend that the bears love to see. For the last year, the company’s shares have been locked in a bearish pattern as its price continues to draw a series of lower highs and lower lows. The bears love this because it makes tradable swings easy to identify and trade.
As of today, U.S. Bancorp shares are trading at the top of this declining range, which is causing the shares to pause. In addition to the trendline resistance, the stock is trading just slightly above its 200-day moving average. Past similar situations have resulted in reversals back below this trendline.
As if you needed another technical reason to sell or short USB stock, the recent rally has resulted in a short-term oversold signal, with the RSI for the stock hovering at 70. Short-term traders should see these signs as weakness on the way for U.S. Bancorp.
Celgene Corporation (CELG)
The biotechnology sector has been playing comeback of late as this oversold dog pack of stocks has presented what long-term investors consider a value play. The technical traders love the action here, as the swings are fast and large. Celgene is setting up for one of those moves as earnings approaches.
Celgene shares just crested above the 200-day moving average, which has been a strong resistance trendline for the shares since they topped out in the summer of 2015. The 200-day pressure has also formed a channel of lower highs and lows that sits right at $104, just slightly below current prices.
Like U.S. Bancorp, Celgene shares are overbought after their 10% rally over the last three weeks. The tired stock could get a rally from a positive earnings report, but the more likely scenario is that we’ll see traders “sell the news” after it appears that everyone has been “buying the rumor.”
NRG Energy Inc (NRG)
It’s hard to like any stock in the energy sector, but the fact is that some of these stocks are building tradable bullish situations. NRG Energy had been on that list, drawing a great technical recovery after bottoming in December, but the bullish tide is now shifting on the stock.
After posting a 100% rally from its December lows, the stock has now run out of energy (pun intended) as shares have started to drift lower. The drift has caused a reversal of the stock’s 50-day moving average from a climbing pattern to declining.
Historically, a stock is twice as likely to trade lower every day that its 50-day is declining.
NRG shares traded below their 50-DMA earlier and are seeing increased volume on that move, indicating that the technicians are starting to see this as a chance to get profits out while they’re still profits ahead of the August 9 earnings report.
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
