Two straight weeks of losses for the markets now has investors looking to get more defensive about stocks as we continue to make our way through the slower, more volatile seasonally weak month of August. While most eyes are going to be focused on the eclipse this afternoon, we’re focusing closely on the technicals of many of the tech companies in the Nasdaq 100 as they’ve been indicating weaker days ahead.
Today’s three big stock charts look at Tesla Inc (NASDAQ:TSLA), Nvidia Corporation (NASDAQ:NVDA) and CSX Corporation (NASDAQ:CSX) as companies that are beginning to extend their weakening trends into short-term bearish outlooks, indicating that the market still has some way to go before the worst may be over.
Tesla Inc (TSLA)
Shares of Tesla have benefited from announcements and speculation that the company would be able to catch-up to production needs and increasing demand. The TSLA charts are telling us that investors’ nerves are growing, leading to profit-taking and a new trend that may extend lower.
- Tesla shares are trading back below their 50-day moving average this morning. It’s the second time that the company has made a significant break of this trend since July. Multiple breaks will draw more selling volume and target lower prices over the short-term.
- In addition to the break below the trendline, TSLA stock’s 50-day moving average is now transitioning into a bearish pattern as it rolls over. This will put Tesla stock into a bearish outlook with further downside risk over the next 4-6 weeks.
- Finally, from a chart perspective, TSLA’s latest highs were lower than the last set, setting the stage for a new pattern of lower highs and lower lows. We haven’t seen this pattern since the stock initiated a multi-month correction that started in May 2016.
Nvidia Corporation (NVDA)
Nvidia shares have been leading the market higher for the last two years-plus as the leading-edge semiconductor company continues to drive innovation in the space.
Despite the strength, NVDA shares are breaking through critical support on the recent pullback.
- The latest earnings results failed to give the spark to Nvidia shares that the market has grown used to seeing. Shares are now slumping through their 50-day moving average. While we did see shares do the same earlier this year after an earnings report, traders were quick to buy that dip. Similar action is necessary to avoid a correction in NVDA.
- Like Tesla, Nvidia’s 50-day moving average is also transitioning into a short- to intermediate-term bearish outlook as the moving average rolls over. This will target lower prices for the Semiconductor company.
- The next technical level of support is almost 25% away with the 200-day moving average sitting at $120. Given the standard deviations of the historically fast corrections we see in Nvidia shares, this is a very realistic outcome. Traders wanting to buy a dip should focus on this price.
CSX Corporation (CSX)
Transportation stocks have been lagging the market and just broke through key long-term support. The move is flashing signs that the economy may already be slowing as transportation stocks are almost always in the lead of long-term bull markets.
After trying to recover, CSX shares are back at a critical chart level that is going to direct the next 5-10% move in the shares.
- Another round of selling has CSX shares challenging significant chart support at $48. This represents the lows for earlier August and a break below this price will represent the failure of a double-bottom and set a new bearish target of $46 in short order.
- CSX shares are seeing growing momentum based on their MACD readings and the RSI for the stock has yet to hit an oversold reading. This indicates that the bears are in control of the day-to-day activity for now.
- Some hope should lie in the fact that the 200-day moving average for CSX resides just above $46, but this also adds risk as a break below both of these will put more selling pressure on shares. Watch for a two-day hold of $46 before trying to catch this tumbling knife.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
