Last week, the Dow Jones Industrial Average overcame the 20,000-mark for the first time, as investors have continued to show positivity heading into the start of the earning season. But the start of the new year is not with out its victims.
With that in mind, a few stocks have been demonstrating some interesting activity over the last few weeks. A familiar name is popping up on our technical trades list as Chesapeake Energy Corporation (NYSE:CHK) is making a technical move that is likely to grab traders’ attention. Meanwhile, shares of Alibaba Group Holding Ltd (NYSE:BABA) and Intel Corporation (NASDAQ:INTC) are seeing some “sell the news” activity that is likely to lead to a short-term buying opportunity for these bullish stocks.
Chesapeake Energy Corporation (CHK)
The energy trade is continuing to fade as oil prices are feeling the pressure of increased domestic production. Thus, one of our most favorite trading stocks is getting ready to make a tradable move.
Shares of Chesapeake Energy have spent the last two trading days slicing through technical support levels. The results, a likely drop for CHK to the $6-level in relatively short order.
Chesapeake stock is coming off its relative highs at $8, which were achieved in December. Since then, momentum and trends on CHK stock have reversed. Today, traders will be watching the 100-day moving average closely.
Historically, moves below the 100-day are accompanied by an increase in volatility. This time around, Chesapeake shares are also looking to potentially break below their lower Bollinger Band. This would also amplify the volatility on CHK stock over the next week as shares likely target their next level of support at $5.85.
Intel Corporation (INTC)
OK, we know that we were talking about the potential for a bullish breakout on Intel last week, but things clearly change. A few days after the earnings surprise, investors are cashing out of some profits on the semiconductor leader. The “sell the news” trade has chart resistance suggesting a lower price on INTC over the next two weeks.
Intel shares topped out at the $38-level on Friday as if choreographed by a dance instructor. Now, INTC shares are seeing an increase in selling volume.
In addition to the chart resistance at $38, Intel shares also hit a short-term overbought signal on Friday. This will increase some of the technical selling on Intel shares for the next few trading sessions.
The test for INTC will come at the $37-level this week. Simply put, a hold of $37 will indicate that it’s time to add more exposure to the company’s shares as they will likely hold their intermediate-term trend with a target of $40. Failure to hold this level will target a short-term bearish move to $36.
Alibaba Group Holding Ltd (BABA)
Shares of Alibaba look to be completing their “sell the news” move after last week’s earnings. The move takes BABA shares to a nice round-numbered support buying level at $100 — something that we are sure won’t be lost on the market.
Last week’s rally took Alibaba stock well into overbought territory, far too deep to consider buying shares without a pullback. Now, we’re getting the exact action that we wanted to see setup a nice intermediate-term trade in BABA.
Worst case on this pullback is that Alibaba shares come back to test the $97-level, which is the site of the stock’s 20-week moving average. Our analysis of the charts suggests that this would bring in a considerable number of technical buyers.
Another bullish catalyst for BABA shares is the short interest ratio, which remains high; the latest reading is 10.5. This is coming off the stock’s highest readings in the last two years. The unwinding of this short interest tells us that the shorts are fueling a short covering rally at these levels.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.