The market continues to adjust to the Trump victory as traders are shifting their focus from dividend yielding investments to more industrial-based companies. The migration of cash is likely to last for the next few quarters as the rebuilding of America initiative starts to build steam.
That said, the charts are giving traders all kinds of bullish signals at the individual stock level, which are paying off quickly. Today’s three big stock charts look at United States Steel Corporation (NYSE:X), Trinity Industries Inc (NYSE:TRN) and Amazon.com, Inc. (NASDAQ:AMZN) as actionable charts.
United States Steel Corporation (X)
Rebuilding of infrastructure has been a large part of President-Elect Trump’s platform. Therefore, it is expected that companies and sectors that focus on this area will benefit. Among those benefiting are steel stocks that will benefit from the rebuilding and the potential for tariffs to be put in place to cut-down on dumping practices that had cheaper steel coming in from countries like China.
Companies of interest include U.S. Steel and AK Steel Holding Corporation (NYSE:AKS), both of which saw a surge of buyers yesterday, rallying shares of X by more than 17%. The shares may seem untouchable at that level to some traders, but the chart suggests more upside.
United States Steel shares surged above their top Bollinger band yesterday as well as long-term volatility bands. The move suggests that that X stock will follow a broader distribution of price movements, which means continued volatility to the upside.
The last similar volatility move was in July of 2014 when U.S. Steel shares broke above similar levels to yesterday and ultimately had the traders chasing the shares to nearly $50. A current long-term trend places the likely target of this breakout for X just below $40.
Trinity Industries Inc (TRN)
Infrastructure spending will clearly get the boost here. Trinity Industries is a manufacturer of everything from railcar parts and other steel components, including guard rails that are present on the side of the highways.
TRN has seen significant improvements to its technical trends ahead of the election. Yesterday’s spike in the shares took Trinity back to the $25-level and threatens to break through to new relative highs above strong trendline support.
TRN is likely to see a little bit of selling pressure as the stock hit an overbought level on its RSI with yesterday’s rally. In this case, overbought may continue to become more overbought if the share price is able to sustain a price above the top Bollinger Band through Friday’s trading. This target price is $24.55.
Finally, the longer-term potential for Trinity is growing to the upside as the stock has now moved into technically bullish territory. TRN stock is now trading above its 20-month moving average after struggling with this trendline as resistance. This will draw longer-term investors into the market as buyers.
Amazon.com, Inc. (AMZN)
Make or break is a good tag to put on Amazon shares as the stock has been unable to revive itself technically since its latest earnings report. AMZN shares have been struggling to hold on to support at their 200-day moving average, something that the traders are watching very closely.
Currently, this trendline rests at $772. The rules of trendlines usually stipulate that a stock normally gets two opportunities to “find” support, then upon the third attempt the technical traders usually lose faith and begin to sell and look for the next line in the sand. Amazon is now using its second chance at support from the 200-day, failure is not an option that the market wants to see.
As AMZN was a trade that was clearly crowded with bulls ahead of its earnings, the path of least resistance, according to our models, is for Amazon to move below the 200-day and likely selloff to the $700 level before finding support from the techicals.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
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