We head into the first week of the third-quarter earnings season and traders are making some changes. For the past two months, the trading cycle has been showing a migration of cash from large-cap technology stocks to the financial sector, putting the financial stock charts into a leading role.
Now, it seems that the market is having second thoughts as we’re seeing a sudden shift to tech again, just as the earnings results begin to spark stocks.
Today’s Three Big Stock Charts reviews the daily price activity of a “Triple A” Combination of technology stocks with Adobe Systems Incorporated (NASDAQ:ADBE), Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) as three companies that may be ready to rally again.
Adobe shares got knocked from their perch a few weeks ago as the stock’s earnings report caused a “sell the news” event that saw shares pull back by almost 10% to a buying opportunity for the technical traders. Since then the stock has put on a strong performance, but faces a technical challenge this week.
- Adobe shares recovered from their “sell the rumor” rally last month as the stock saw investors lock-in profits after another positive earnings report. The stock rallied back into a technically congested area between $152 and $154 where it is now seeing selling pressure.
- This morning, Adobe shares are trading back below their 50-day moving average. This is likely to increase the technical selling pressure on the stock as traders take profits from the recent rally.
- Traders will be watching for strength at the $150 level as this would signal an opportunity to grab the shares again ahead of their next intermediate-term rally.
Another stock that has felt the pain of a “sell the news” correction is Apple Inc. Apple stock tumbled, as it normally does, after the last new product announcements as traders took profits from the run-up to the event. Now, after trading below technical support, the stock is setting up for a likely “buy the rumor” rally.
- Apple stock had the air let out of it as the stock fell from $164 to $150 after their product announcements. The stock had clearly been overbought ahead of the news event.
- Shares recently bounced from chart support that was in-place at $152. We’ve seen consistent buying volume on this move suggesting that the breadth is likely to continue its strengthening.
- Today, Apple shares are breaking above their 50-day moving average at the same time that they are cracking the top Bollinger Band which suggests that the stock will undergo a volatility rally. We should see some resistance at $162, but the stock will also experience a “buy the rumor” rally ahead of its earnings scheduled for Nov. 2.
Amazon.com continues to be stick is an intermediate-term technical bear market as the stock is trading in a bearish pattern, but that looks to be improving.
The stock is trying to make a break above the psychologically important $1,000 mark, as traders are increasing their buying volume on the stock ahead of earnings.
- com is spending its second day above the $1,000 mark today as the stock has been making a relatively quiet move to overtake this psychologically important round numbered technical level. A break above could warrant a rally similar to the July move that saw the stock surge to $1,080.
- Momentum on Amazon.com shares has moved back into bullish territory as volume, volatility and price direction have all aligned to forecast higher prices.
- Historically, we are used to seeing a pre-earnings rally of 5-7%. With earnings more than a week away, the stock is on our list of short-term bullish trades.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.