The Dow Jones Industrial Average is getting a jump today as International Business Machines Corp. (NYSE:IBM) shares are trading almost 10% higher after better-than-expected earnings results. The move isn’t as strong in the S&P 500 and Nasdaq Composite as the broader markets are moving sideways. The string of new highs on the major exchanges is starting to push a number of stock charts into overbought territory ahead of their earnings reports. We’ve noted a swing of funds into the technology stocks over the past two weeks as results from the financials haven’t impressed.
Being aware of the “sell the rumor” rule, today’s Three Big Stock Charts looks at the technical of Alphabet Inc (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT) and Exxon Mobil Corporation (NYSE:XOM) as all three are flashing short-term overbought signals.
Alphabet shares have rallied over the last month as a migration into large-cap tech stocks has taken place ahead of earnings. The stock now sits at a critical test ahead of its earnings release on Oct. 26. The next week may see a “sell the news” pullback ahead of this report according to the current chart.
- Shares are now sitting just above the psychologically critical $1,000 price. The stock has failed to hold this level previously in June and July. A move below the $1,000 mark will increase selling pressure.
- Shares of Alphabet are now in overbought territory according to their RSI. This suggests that the stock is likely to see some selling pressure due to profit-taking by traders.
- A pullback in Alphabet stock would likely be short-lived as the stock would find its first round of support at $980. This would be seen as a buying opportunity ahead of earnings.
With shipments of PCs on the rise, Microsoft and other hardware companies have seen a tailwind that has helped shares rally into their earnings reports. Microsoft is set to release earnings in a little over a week on Oct. 26. The current chart suggests that we may see some selling ahead of the report.
- The recent rally to $78 has carried Microsoft stock into a technically overbought situation. The last similar signal was in June ahead of a pullback from $72 to $68 that occurred in roughly a week.
- Microsoft shares tend to trade lower ahead of their earnings as traders look to lock-in profits on gains ahead of the volatility caused by the company’s earnings report.
- Currently, the difference between the current price and the 50-day moving average of Microsoft shares has hit a historical extreme. This often signals that a stock has technically extended itself too far and is due for a correction.
Exxon Mobil (XOM)
Oil prices have seen an increase in volatility along with the related energy companies. Exxon Mobile has rallied back to chart and technical resistance causing the stock to begin a consolidation that appears to be ready to turn into a small correction. The slightest turn lower in Crude prices will likely tip this balance.
- Exxon Mobil shares are now trading just below $83. This price has been a technically significant level for all of 2017 as the stock has reversed from rallies at this price dating back to March.
- While Exxon Mobil stock is hitting chart resistance they are also registering an overbought signal from their RSI. The latest readings have crossed above 70, usually an indication of upcoming price weakness.
- The 50-day moving average for Exxon Mobil remains in a bearish trend. This suggests that any selling pressure will be increased as the technical traders and programs determine the latest rally an anomaly within the longer-term trend.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.