The bifurcation between technology and larger industrial stocks continues this week as we’re seeing signs that the tech heavy Nasdaq and Nasdaq 100 indices are beginning to lag the broader indices again.
As I mentioned last week, this is part of a seasonal trend that sees the Nasdaq 100 Index underperform the S&P 500 80% of the time over the last 20 years. The catch, the tech sector catches fire in January for some of the strongest seasonality rallies of the year.
Despite the weakness, there are still some signs of strength from tech world. Today’s three big stock charts looks at the numbers for companies like Adobe Systems Incorporated (NASDAQ:ADBE), Automatic Data Processing (NASDAQ:ADP) and Activision Blizzard, Inc. (NASDAQ:ATVI) who are bucking the seasonal trends as these stocks are beginning to break into bullish trading trends.
Adobe Systems Incorporated (ADBE)
Adobe shares have seen a pullback lately as the company gets ready to announce its quarterly earnings results next Thursday. It is somewhat normal for ADBE stock to see a “sell the rumor” move ahead of earnings, especially after a run like the shares have seen lately.
- Yesterday’s price movement in ADBE saw a technical test of the 50-day moving average. For now, Adobe shares are bouncing higher from this strong trendline. The 50-day moving average is also trending higher, indicating that the intermediate-term outlook remains positive for ADBE stock.
- The previous sell-of in Adobe shares took the RSI for the stock to a near-bullish reading of 30. This suggests that it is going to take less in the way of buying volume to get the shares trending sharply higher ahead of earnings.
- Our test of ADBE stock showed that it trades higher 91% of the time before and after its earnings report over the last three years.
- Watch for a break above $117.50 to serve as a trigger for the rally that will carry shares to $190.
Automatic Data Processing (ADP)
Shares of ADP have been engaged in a volatility rally that kicked off in early December. The stock has ridden the wave of increased volume and volatility to the tune of more than 7%.
Now, traders are starting to wonder about how much further the rally can reach as ADP shares are hitting overbought readings.
- The current RSI for ADP stock has crested over readings of 70. Typically, this is indicative of a short-term correction to a stock that has been in rally mode.
- The Chande Trend Meter for ADP stock remains bullish as readings are within the range of 80-100. This allows for the potential for short-term corrections without the stock falling out of its bullish trend.
- The 50-day moving average for ADP stock is in the perfect position to help bounce from a short-term “healthy” correction. Currently at $113, a move to this trendline would represent a roughly 5% correction that will bring a new wave of buyers into the stock to press it higher again.
Activision Blizzard, Inc. (ATVI)
This video game producer has been lagging the market for months as ATVI shares have traded in a wide range followed by a sharp decline that started two weeks ago.
After bouncing at $57, shares are now on a sharp volume-driven rally that looks to have the potential to break the top of the $66 range.
- The recent pullback to $57 tested the stock’s 200-day moving average, a site of critical and strong support. The bounce indicates that bullish technical buyers have engaged ATVI shares.
- This week’s move has Activision shares trading back above their 50-day moving average, which is also trending higher. ATVI stock will be considered back in a bullish technical trend upon holding above this trendline for the rest of this week.
- For now, shares have a clear path to rally another 4.2%, which many short-term traders would be happy to take in this market. A break above this level will initiate another volatility rally on ATVI that will target $70.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.