This morning’s ADP jobs data gave the market a boost as investors are now considering that the economy may be performing at a stronger pace than they had hoped. As a result, some of the more beaten down and lagging stocks on our radar are grabbing a bid as traders look for technical deals.
Today’s big three stock charts takes a look at Chesapeake Energy Corporation (NYSE:CHK), Chipotle Mexican Grill, Inc. (NYSE:CMG) and International Business Machines Corp.(NYSE:IBM), three companies that are seeing upside opportunities according to shifts in their technical charts.
Chesapeake Energy Corporation (CHK)
As we’ve pointed out many of times, Chesapeake shares are one of the most technically sensitive shares in the energy sector as the charts almost always play a heavy determination in the stock’s daily activity.
Last week, CHK stock was bolstered by mention on Jim Kramer’s show, as it was deemed that the stock was ready to place a bottom. Since then, shares have rallied 26%, but the run looks tired for now.
The recent rally in Chesapeake Energy took the trend of lower highs out, indicating that the intermediate-term trend is likely to favor the bulls for now. In one trading day, CHK stock has now broken above the 200-day moving average and above the top Bollinger Band.
This technical development opens the stock up to short-term bulls to trade Chesapeake to $7 as a bullish volatility trade comes into play.
Also helping the rally will be the short sellers. While the short interest ratio on CHK is only 3.5, the total short interest outstanding accounts for more than 15% of the stock’s float. This means that the stock will have to change hands a lot in order to close short positions, adding to upside volatility.
Chipotle Mexican Grill, Inc. (CMG)
The beleaguered fresh fast food chain is finally seeing some buying pressure as some seismic shifts at the company’s upper management are giving investors hope that CMG stock has placed a bottom.
From a technical perspective, our models have turned positive on Chipotle shares as the 50-day moving average is now trending higher on a daily basis. Additionally, CMG’s 50-day average just crossed above the 200-day, otherwise known as a Golden Cross. This indicates that the longer-term outlook is improving.
From a long-term perspective, Chipotle stock’s 20-month moving average is currently at $463, which should be considered the next test for the shares. A move above this trendline will cross shares of CMG into a bull market and likely grab the attention of longer-term investors.
For now, we may see a little bit of selling, as Chipotle stock has crossed into overbought territory. Look for any decline to $435 to be met with technical buyers interested in rising the longer-term improvements in the trends.
International Business Machines Corp. (IBM)
If Chipotle and Chesapeake are the hares in the race then International Business Machines is the tortoise that just keeps going.
Big Blue has been on a steady rally since breaking into a bull market in June of 2016. Recently, IBM shares have pulled back with the rest of the market and the stock broke below its 50-day trendline. For now, this trendline is still ascending, giving IBM shares a bullish intermediate-term outlook.
The stock has potential support from the following two factors at this time: First, the 100-day moving average, which sits at $171; second, IBM stock is nearing oversold readings, signaling that the sellers are getting tired and that fewer buyers will be necessary to turn the stock around to move higher.
IBM will report its earnings on April 18. More recently, we’ve noticed that the shares have been performing well after their earnings reports, especially after the stock has taken time to consolidate the way they are now.
Watch for short-term volatility to start leading shares higher.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
