Stocks are headed lower as the trading week ends despite some positive earnings results from companies like Visa Inc (NYSE:V) and Microsoft Corporation (NASDAQ:MSFT). The weakness in the major indices has our interest turning to watch out for stocks that may have extended their rally a little too far and are ready for a short-term pullback.
Today’s three big stock charts look at Anheuser Busch Inbev NV (ADR) (NYSE:BUD), Apple Inc. (NASDAQ:AAPL) and Baidu Inc (ADR) (NASDAQ:BIDU) as all three of these heavily traded companies are flashing signs that their overbought conditions are setting them up for a short-term pullback.
Anheuser Busch Inbev NV (BUD)
Shares of Anheuser Busch have been trading in a weaker pattern over the intermediate-term, indicating that BUD stock should be running into resistance. The last two weeks have seen a rally in the stock that took the shares into a short-term overbought situation.
- With a current RSI reading above 60, Anheuser Busch is hitting a level of overbought condition that has historically slowed or reversed the short-term directional moves of BUD. This should weigh on shares as selling pressure increases.
- The 50-day moving average on Anheuser Busch is also coming into play as the stock briefly traded above this key trendline and is now breaking back below it. This move will trigger more selling pressure on the stock.
- Short-term support for BUD shares is in place at the $100-level from round-numbered support and the fact that this is where shares bounces in early July. Expect to see traders step back in to buy Anheuser Busch stock at this level to create a potential double bottom pattern.
Apple Inc. (AAPL)
Apple stock has mounted a rally of 6% since the beginning of July; however, the shares are running into resistance at the $150-level as the result of a few indicators that are suggesting lower prices are likely ahead of the company’s upcoming earnings report.
- AAPL shares have run into technical resistance in the form of the mean of the regression channel that extends back to the May 2016 bottom. This is a normal resistance level for stocks to run into and normally results in a short-term break in a rally.
- Like Anheuser Busch, Apple stock is in the process of breaking back below its 50-day moving average after spending a brief time above the critical trendline. This move will result in additional selling pressure on AAPL shares over the next few weeks.
- The two-week rally in Apple stock resulted in a short-term overbought reading from the stock’s RSI. For now, this is likely to add to selling pressure that should result in a trip to support at $145 before buyers step back in to begin buying AAPL stock again.
Baidu Inc (BIDU)
Baidu shares have been on a tear since the end of June to the tune of more than 8%. BIDU stock is in an intermediate-term bullish trend that is likely to continue over the next three months. That said, the stock is now trading in overbought territory and appears ready for a short-term correction that would be worth buying into on the dip.
- The current RSI reading for Baidu shares currently sits at 73. In recent history, all readings over 70 have resulted in pullbacks of more than 5%, providing opportunities for short-term traders to buy back into the stock.
- In addition to the overbought conditions, BIDU shares are trading around $195, which has been clear chart resistance in an intermediate-term trading range.
- With Baidu’s 50-day moving average in a strong uptrend, the stock is likely to find support at $184, which would represent a 4% pullback. Our models suggest that this will be the area where BIDU stock finds support and continues its rally.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.