3 Big Stock Charts for Friday: SPDR Gold Trust (ETF) (GLD), Medtronic PLC (MDT) and Caterpillar Inc. (CAT)

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Futures are pointing to a higher open as some of the large banking stocks released their earnings this morning. Despite the positive tone, there are still a number of technical struggles at the stock level that have implications not only for these large, widely watched names, but also potentially for the market.

Today’s three big stock charts looks at the charts for the SPDR Gold Trust (ETF) (NYSEARCA:GLD), Medtronic PLC (NYSE:MDT) and Caterpillar Inc. (NYSE:CAT), which find themselves at a technical crossroads likely to determine the next 5% to 10% move for each.

SPDR Gold Trust (ETF) (GLD)

SPDR Gold Trust ETF (GLD)
Source: Chart courtesy of StockCharts.com

Sentiment towards Gold and other precious metals remains bullish as investors appear to be waiting for the bottom in the Yellow Metal. Our approach pegs that as the time you need to be most worried about lower prices, which is why we’re eyeing the technicals on the SPDR Gold Trust ETF.

The modest 7% rally since mid-December has many investors thinking that a new trend in Gold is being forged; however, GLD’s technicals suggest that this is just a temporary rally in an otherwise bearish trend.

GLD shares just crossed their 50-day moving average yesterday, putting them in a testing phase.  Typically, our research shows that a break back below this trendline tends to happen within two days, followed by a selloff. In this case, GLD shares must maintain a price above the $113.50-level until Tuesday to consider them a technical buy.

Adding to the potential for this to turn to a selling opportunity is the fact that the SPDR Gold Trust ETF encroached an overbought reading on the RSI for the shares. This, added to the 50-day pressure adds up to a short-term technical trader’s dream signal for a selloff.

The technicians will be watching the $113.50-level closely and taking their cue from the GLD’s ability to maintain a price above it. A move below will draw selling volume into the market and a likely target of $108 over the next two weeks.

Medtronic PLC (MDT)

Medtronic PLC (MDT)
Source: Chart courtesy of StockCharts.com

Positive coverage in a Barron’s article helped Medtronic rally more than 7% over the last week, right into a technical roadblock.

MDT shares moved from historical chart support at $71 to $75 within days after the article. Now, Medtronic shares are faltering at this price with heavy technical resistance looming overhead.

The overhead resistance comes in the form of the stock’s 50-day moving average, which has been declining rapidly. The combination of the trendline and its trajectory are putting technical pressure on MDT stock as traders try to decide if they should sell into the recent strength.

Should the rally continue, a long-term barrier must be overcome, as Medtronic stock’s 20-month moving average is just overhead at the $77.75-mark. MDT stock has been trading below this long-term trendline for the last three months, putting it in a long-term bear market. Pressure from this trendline will be stronger than the current battle with the 50-day.

As it always seems lately, Medtronic must also deal with a short-term overbought situation as the short and fast rally has shot the shares into an overbought reading. A consolidation at $75 would help MDT shares gain some traction for the move to $77.75, but a more likely scenario is that we will see Medtronic trade back to support at $72.50 before moving much higher.

Caterpillar Inc. (CAT)

Caterpillar Inc. (CAT)
Source: Chart courtesy of StockCharts.com

Caterpillar shares are among the companies that have benefited from the “Rebuilding America” rally that has taken the market higher since the elections. CAT rallied almost 20% right after the elections and has gone sideways since, as the market tried to decide if the “Rebuild Rally” really is more than a short-term reaction to the election results.

The drift sideways has broken the momentum that Caterpillar stock built in December and put shares at risk of a reversal. A simple, yet decisive, test is forming over the last week, as CAT stock is not bumping against support from the 50-day moving average daily.

A break of the 50-day moving average will send a message that the technical traders are now giving Caterpillar shares room to move lower as they capitalize on the December rally by selling at these highs. From our stock model’s perspective, there is another side to CAT’s story though.

Short interest on Caterpillar shares remains relatively high as the short interest ratio stands at 10.2.  This suggests that there is a large contingent of bears that have been betting against CAT by shorting their stock. The problem is that if the stock picks up on its December rally these shorts will get squeezed and must buy stock to cover their losing positions.

This situation makes the 50-day test a high impact situation for Caterpillar. A rally from this support has the potential to drive the price of CAT another 10% higher as the shorts get involved with the buying, while a break below will target the $90-level quickly.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/3-big-stock-charts-for-friday-spdr-gold-trust-etf-gld-medtronic-plc-mdt-and-caterpillar-inc-cat/.

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