The market is set to move sideways after hitting its first streak of two day wins for October. Traders will be eyeing the S&P 500 at 2,140, as this is a key support level for the market. A break above this level will give stocks a boost. Meanwhile, Intel Corporation‘s (NASDAQ:INTC) earnings results are casting a shadow on the tech sector, but not enough that we’re not finding plentiful opportunities among the technology sector. Remember, tech stocks are the strongest group for performance from October through December each year.
Today’s Big Stock Charts examines KB Home (NYSE:KBH) and Cypress Semiconductor Corporation (NASDAQ:CY) as stocks that are being affected by sector news. In addition, we take a look at Depomed Inc (NASDAQ:DEPO), which is drawing an interesting short-term pattern that suggests that traders will be able to grab DEPO shares at lower prices within the next few weeks.
KB Home (KBH)
Housing data continues to show a decline in the market that is tricking down, or up as it would be, to homebuilders like KB Home. KBH shares have been trading in a range between $15.50 and $16.50 for the last three-months with the occasional dip below the $15 range here and there.
Furthermore, KB Home stock has been trading with a lower valuation and a price-to-earnings ratio of 13, leading some investors to believe that KBH stock is a “deal”, but that is not the case if the price is preparing to break down.
The recent consolidation has started to roll over a bit, flashing a warning sign of lower prices as it has caused a decline in momentum. The kicker here will be the next move below $15.50.
A move below this “trigger price” will see KB Home shares move to the $14.50 price point on an increase in selling volume based on the momentum for the stock building to the downside. This will lead to another make-or-break scenario for the stock, as this is the site of KBH shares’ 20-month moving average. Simply put, a move below this will offer a move to $14 before the end of the year.
Cypress Semiconductor Corporation (CY)
Setting up for a short-term bounce, Cypress Semiconductor shares are testing the same support levels used in June and July this year. The recent decline in CY, blamed on the Samsung Electronic KRW5000 (OTCMKTS:SSNLF) disaster, has firmly pressed Cypress Semiconductor stock into technical oversold territory. On this alone, CY stock is likely to see a 10% to 20% rebound in short order.
From a longer-term perspective, Cypress Semiconductor shares maintain a bearish outlook because the shares are breaking back below their 20-month moving average. But for the time being, CY stock should see some support from short-term traders looking to scalp quick returns.
As it stands now, Cypress Semiconductor shares have 9% upside potential with a target of $11.50 before they run into overhead resistance.
Depomed Inc (DEPO)
Depomed shares have done a great job of building technical strength and leading the market higher. DEPO shares are trading 30% higher year-to-date and more than 15% higher over the last year. While the intermediate-term outlook for Depomed shares remains positive, we’re seeing a pattern develop that tells us we’ll see a chance to buy the shares at lower prices over the next month or so.
While DEPO stock is breaking below its short-term 20-day moving average, its pattern is drawing a short-term head-and-shoulders pattern with the neckline at the at the $4 price level. These patterns are interesting as they show investors locking in profits after failing to rally after hitting highs, which is what happened with Depomed shares since peaking in early October.
For now, traders should take a cue from a break below $24 that DEPO will make a move to $22 where the shares then become a good bullish pickup.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.