Tuesday’s bounce is favoring technology, retail and homebuilders, which are getting the brunt of buying interest. The technology sector has been dropping relative strength as the big-hitter in the Nasdaq 100 Index, Apple Inc. (NASDAQ:AAPL), is making a bit of a bounce today, helping move the PowerShares QQQ Trust, Series 1 (ETF)’s (NASDAQ:QQQ) needle higher.
Today’s three big stock charts look at the patterns of the aforementioned AAPL along with shares of Nike Inc (NYSE:NKE), which reports after the bell today, and Autodesk, Inc. (NASDAQ:ADSK), which is teetering on the brink of a volatility sell-off signal.
Apple Inc. (AAPL)
Apple shares declined 10% from their highs to the lows hit yesterday, marking what many would call a “perfect” pullback. AAPL stock is responding to a near oversold reading from the RSI today in rallying a little more than a percent, but the rally looks suspicious. Traders should beware of a sucker’s rally before buying the stock.
- After spending three days trading below their lower Bollinger Band, Apple shares are responding to the volatility sell-off with a bounce from oversold readings of the RSI. The last similar bounce in June turned out to be of the dead cat variety as AAPL stock rallied for a few days only to reverse lower again.
- Momentum indicators are now in neutral to bearish territory as the stock’s selling has picked-up speed on increasing volume. This signals that the “crowd” has been migrating away from Apple shares and it will likely continue.
- We identified the $150-level as likely support last week as this represents strong round-numbered chart support. Expect a re-test of this level within the next week that will likely lead to a potential price target of $142 for AAPL stock.
Nike Inc (NKE)
Nike will release its quarterly earnings results this afternoon after the close. The stock has had a volatile and negative bias over the last two years when it comes to earnings reactions trading. Unfortunately, the athletic companies have suffered lately, meaning NKE may have a hard time impressing traders with anything other than blowout numbers.
This increases the risk surrounding its earnings announcement.
- Nike’s intermediate-term technical outlook is bearish based on the trend of the 50-day moving average, which as of Sept. 11, is in a steep downtrend. NKE stock has spent the last two weeks consolidating at $53. A break below this price will increase selling pressure quickly.
- The recent consolidation is setting Nike shares up for a volatile move. As of today, the distance between the stock’s Bollinger Bands is the smallest since May when the stock initiated an 8% volatility sell-off.
- Even if NKE beats expectations, the stock will have to deal with what is likely to be overwhelming resistance from the confluence of its 10- and 20-month moving averages. The stock has been trading in bear market territory since moving below the 20-month moving average last month on increased volume. The bottom line? Traders should be wary of Nike shares.
Autodesk, Inc. (ADSK)
Autodesk continues to lose strength against the market and shares are now listing into intermediate bearish territory. ADSK stock has been trading in a wide range after grabbing the market’s attention and spiking higher after its May earnings. Now, the stock suffers from being a little too crowded with potentially complacent investors.
This is often the mark of a stock ready to correct.
- After many forays with its 50-day moving average, Autodesk shares are now making a move back below this key trendline. The 50-day has also leveled-out, indicating a neutral to bearish outlook for the next four to six weeks.
- ADSK shares are holding on to their lower Bollinger Band and threatening to break this level. A break below $109.75 will signal increased potential for a volatility sell-off and an initial target of $104.
- Momentum indicators such as the Chande Trend Meter have turned neutral and are heading towards bearish readings. This will put additional pressure on the stock and lower the technical target to $95.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
