It has been a slow start to the week as the markets recoiled a bit in early morning trading. The day’s headlines have been marked with news of General Electric Company’s (NYSE:GE) dividend cut along with Qualcomm, Inc.’s (NASDAQ:QCOM) rejection of Broadcom Ltd’s (NASDAQ:AVGO) offer to buy the company.
The news of General Electric’s dividend cut begs another review of what the charts are saying about the stock as traders may equate today’s news with a “kitchen sink” moment and start buying. We’ll look at that chart along with the charts for Advanced Micro Devices, Inc. (NASDAQ:AMD) and Ford Motor Company (NYSE:F) as our three big stock charts for Monday.
General Electric Company (GE)
GE’s post-earnings decline has continued as the company’s fundamental outlook remains in question. This morning, the company cut its dividend for the third time in its history as it tried to right its ship. Should traders buy on the news? Let’s look at the chart.
- In our last commentary, we identified the importance of the $20-level, as this price serves as a psychological and chart support level. We expected to see a short-term dead cat bounce that would turn to more selling. This morning’s news is providing the catalyst for that selling, which should increase.
- The oversold signal from GE stock’s RSI still has the potential to help maintain prices close to the $20-mark over the next few weeks, but analyst price downgrades are likely to start hitting the headlines, which will increase selling.
- According to the Chande Trend Meter, GE stock is in a similar situation to October when the stock saw a short-term rally but remained in a bearish trend. As of now, our price target remains at $16.
Advanced Micro Devices, Inc. (AMD)
Semiconductor companies have been one of the leaders in the market this year as innovation and demand for new products are combining for a positive fundamental backdrop for the group. AMD has been one of the exceptions though, as the stock is down 3% year-to-date.
The stock is sitting at a must-win level as it heads into the year-end.
- AMD shares just saw a bearish “death cross” pattern form on the stock. This identifies a worsening trend in the stock’s price and is typically a precursor to continued selling pressure from the technical traders.
- From a round numbered perspective, $11 is an incredibly important price for AMD shares to hold. This price acted as significant support for the stock in May, June and October of this year. A move below $11 will serve as a psychological mark against the stock.
- Looking at the long-term chart, the expected break below $11 will open-up a move to $10.00, which is where the stock’s 20-month moving average resides. We expect to see some long-term buying interest come in at that point, but until then, traders should remain on the sidelines or short AMD stock.
Ford Motor Company (F)
A laggard in the auto industry, F shares are trading at the exact same price they started at on January 3, 2017. The stock has been range-bound for the last month as traders have been unable to commit to higher prices.
The charts tell the story of a transition that the bulls should take note of before the stock potentially breaks lower.
- F shares have held a tight range within the $12.00 to $12.20 price levels for the last few weeks. The low volatility readings that have resulted from this suggest that a volatility move is pending that will move the stock by more than 5%.
- Short-term traders have been keying off of the 20-day moving average that is beginning to roll over and give short-term bearish indications. This will accelerate selling pressure if a break below $12.00 occurs.
- The Chande Trend Meter is teetering on neutral readings after having been bullish since early September. This tells us that the F rally has lost its legs and is likely to see some profit taking. We’re targeting a higher probability that the stock hits $11.40.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
