This morning’s news wire was busy with news from Darden Restaurants, Inc. (NYSE:DRI) and Amgen, Inc. (NASDAQ:AMGN). Darden shares are trading slightly higher after the company reaffirmed its fiscal year 2017 financial expectations while Amgen shares are suffering from another analyst downgrade after a lackluster year.
Finally, there’s no news on Caterpillar Inc. (NYSE:CAT), but the shares are sitting in position to benefit from intermediate-term support that is likely to set up a short covering rally to drive the stock higher into the new year.
Darden Restaurants, Inc. (DRI)
Casual dining companies are starting to see another bullish environment as the consumer is starting to get out of the house with their discretionary income. Darden Restaurants has been one of the outperformers in the group as the company’s shares have posted about 36% gains in the past year.
Shares of Darden are sitting at a technical support level as the shares recently retraced back to their 20-day moving average. This trendline has been very friendly for DRI stock, acting as support for the intermediate-term bullish outlook since the recent rally began.
In addition to the technical support, Darden is likely to get a boost from the company’s earnings guidance that was released this morning. The report shows that Darden expects their financials to fall in line with expectations as they reaffirmed fiscal year 2017 financial expectations.
Support at $75 that will push shares back toward the $79-plus highs should also spark some short covering to act as a catalyst for addition gains into early 2017.
Amgen, Inc. (AMGN)
Amgen shares have been one of the weaker names in the biotech sector, as AMGN stock has lagged both the S&P 500 and the SPDR Biotech ETF (NYSEARCA:XBI) over the past year. Now, with shares trading near the lows of the long-term trading range, we’re seeing an increase in the risk that the biotech giant may take another technical step lower.
AMGN stock is suffering from technical resistance in the form of its declining 50-day moving average. Currently, the trendline is sitting just above the stock at $148. The fact that this trendline is in a declining pattern also bodes poorly for Amgen’s short- and intermediate-term outlooks.
As of now, traders should be watching the $145 level, as a break below this price will likely trigger an increase in volume on the sell side that should quickly target the $135 price as the bottom of the range for now.
Caterpillar Inc. (CAT)
Infrastructure and construction-related stock continue to lead into the year-end, as money managers and traders continue to move cash from the technology sector to these groups. Caterpillar is one of the winners in the rebuilding economy with its heavy construction equipment.
CAT stock was already on a tear for the year as shares are 36% higher for the year and have been holding a very strong trend since February.
Caterpillar’s 50-day moving average is the trendline that the traders are watching right now. Just below current prices at $90.44, the 50-day moving average has been supportive of Caterpillar’s rally since February when it transitioned into a bullish ascending pattern.
The recent pullback from overbought conditions is also providing a positive short-term technical backdrop as the shares now have room overhead without hitting an overbought (or crowded) scenario that would trigger some profit-taking.
Watch for the next rally to take the $97.50 level and likely spark a short covering rally that will shoot Caterpillar shares over the $100 mark.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.