Stocks keep hitting new highs, making investors and traders forget the fact that what goes up must come down, at some point. While the market appears ready to continue its trajectory higher, there are some well-known stocks that are giving traders the opportunity to sell or short them as their outlook is not as bright as the rest of the broader market.
Today’s best stock charts reviews the technical views of Wayfair Inc (NYSE:W), FireEye Inc (NASDAQ:FEYE) and Ulta Beauty Inc (NASDAQ:ULTA) as three examples of charts that are going against the grain of the market by forecasting lower prices.
Wayfair Inc. (W)
Online retailers haven’t had the best of quarters as shares of companies like Amazon.com and Wayfair have lagged the rest of the market. Part of this is because of the migration away from technology stocks into the financials and other groups as the rally heads higher.
The rest of the blame may fall on valuations. For whatever the reason, Wayfair shares look ready to break even lower.
- Tuesday’s trading took Wayfair stock below chart support at $67.50. Our models identified this as a “line in the sand” for the stock as we’ve seen increased trading on other challenges of this price. Another day below this chart support will trigger more technical selling.
- Two weeks ago, the 50-day moving average for Wayfair stock indicated a bearish intermediate-term outlook as it transitioned into a descent. Immediately after this, the 50-day acted as staunch resistance for the stock. This is indicative of a new 4-6 week bearish outlook for shares.
- Momentum indicators are now pointing to further declines. The Chande Trend Meter is almost signaling a bearish outlook while the MACD has been bearish.
- For now, expect support to kick in at $57.50, 13% lower than Tuesday’s close.
FireEye Inc (FEYE)
Cybersecurity has been a hot button since the Experian hack and FireEye has the rally to prove it. The stock has run 25% higher since the beginning of September. The stock’s white-hot performance has caused it to hit some extreme oversold signals increasing the likelihood that we’ll see the real traders take some profits, forcing the stock lower in the short-term.
- Upon hitting $18, FireEye stock hit not only an overbought signal with its RSI reading well above 70, but the stock also ran into a psychologically significant round number. We’ve seen one-dollar increments support and reject this stock over the last six month, $18 is no different as resistance for now.
- The stock attempted to initiate a volatility rally last week, breaking above the top Bollinger Band, but this rally fizzled out quickly on higher than average volume. This indicates that sellers are beginning to offset buyers and that equilibrium in demand is shifting into the hands of sellers.
- Another perspective of the resistance from $18 is noted with a view of the longer-term monthly chart of FireEye which shows this price acting as resistance three times in 2016. Traders will key in on this ahead of the company’s November 1 earnings report and likely “sell the Rumor” while locking in profits.
Big Stock Charts: Ulta Beauty Inc (ULTA)
Ulta had been one of the darlings of the consumer discretionary stocks in 2016, but that luster has rubbed off as the stock now finds itself in a longer-term downtrend that is continuing to worsen. The stock is now breaking into another volatility selloff with little buying volume coming in to help this bear market stock.
- Ulta Beauty shares broke below their lower Bollinger Band yesterday for the second time in less than a month. The stock is suffering as this once crowded trade is now seeing a constant migration of funds out of the shares.
- Last week, momentum indicators signaled another round of bearish selling as the Chande Trend Meter moved back below 25. The last instance of this saw Ulta Beauty shares go from $245 to $210.
- From a monthly perspective, Ulta Beauty stock is trading well in a bear market trend as the stock is trading in its third month below its 20-month moving average. The stock’s intermediate-term target is around $175 according to our technical models.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.