The S&P 500 appears ready to continue its vacillation at the 2,500 level, a level that has acted as important technical resistance over the past month due to its round-numbered qualities. Yes, that’s right, round numbers act as simple support and resistance. In general, the more zeros, the stronger the support or resistance.
Given the broad market resistance, there are many stocks that are having trouble breaking out of their respective short- to intermediate-term bearish patterns, despite flashing some bullish signs over the last week. Today’s three big stock charts look at some of the bigger names in these groups, namely Microsoft Corporation (NASDAQ:MSFT), General Electric Company (NYSE:GE) and Qualcomm, Inc. (NASDAQ:QCOM).
Microsoft Corporation (MSFT)
The trend is turning unfriendly for shares of the software and cloud giant Microsoft. Since topping out above $75, MSFT has made a beeline to $73, where it is threatening to break key support. The stock typically has a very strong historical showing in October, its best month of all 12, but will this technical trip turn the tables on history?
- Microsoft shares are now on their fourth day of trying to hold support at the key 50-day moving average. This trendline is now shifting into neutral and at risk of transitioning into an intermediate bearish trend.
- The $73 price level is turning into a battleground for MSFT shares. The price area is the confluence of the following three technical measures of which a break below will accelerate selling:
- The already mentioned 50-day
- The lower Bollinger Band for the stock
- Historical chart support and resistance
- Momentum, according to the Chande Trend Meter, has slipped into neutral territory. Our testing of this combination of technicals forecasts a move to $71 before meaningful buyers will step in to accumulate shares.
General Electric Company (GE)
The “General” has been in a serious downtrend over the last year as the company continues to try to adjust to changing economies and markets.
Recently, GE stock made a move higher after bouncing from $23.50, but at this rate, it appears these lows will be revisited and likely broken as the most industrial of the industrials continues to suffer.
- General Electric shares are deeply entrenched in a bear market trend as the stock trades well below its 10- and 20-month moving averages. GE stock hasn’t seen a technical bear market this severe since the 2008 meltdown when shares dipped into single digits.
- From a shorter-term perspective, traders scooped-up shares when the RSI hit an oversold reading a few weeks ago, but this dead cat rally has run out of legs.
- The same dead cat rally took shares of GE to their 50-day moving average where they struggled and have now been rejected. Watch for a move below $24 to trigger another round of technical selling that will target $22.
Qualcomm, Inc. (QCOM)
Qualcomm, along with others related to the communications sector, has been struggling in a tightening market. The stock reflects this as QCOM stock is trading in a bear market.
A recent bump in the stock price gave some traders hope of a pending recovery; however, our charts implicate another reversal lower is on the way.
- Qualcomm shares rallied from their September lows, with the announcement of the Apple product launch. This rally took the stock straight to their 50-day moving average, which is in a bearish trend. Shares were rejected with volume increasing. Today’s price action will re-test this key trendline. A break back lower will increase selling pressure yet again.
- Momentum indicators show that Qualcomm shares remain in short-term neutral territory as the stock begins to tilt lower again. Without a technical catalyst, such as a break above the 50-day, the stock is likely to continue drifting lower.
- Long-term, the 10-month moving average of QCOM stock has crossed below the 20-month. The stock was already in a bear market; however, this cross-under suggests that this long-term trend is fortifying. The last similar cross happened in April 2015 ahead of a drop from $65 to $45.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
