For a short while this week it looked like stocks would escape the drag of trade-war talk and finish up the month of June on a bullish foot. Now, however, doubts have been rekindled.
Thursday’s selloff pulled the market back to the brink of at least a small breakdown and did so at a time of year when stocks struggle anyway. Recently IPO’d iQiyi (NASDAQ:IQ) led the way, losing 12% largely due to simple profit-taking.
In some cases though, a chart’s gonna do what the chart’s gonna do, regardless of which way the market tide is pointed. The three names most likely to be shaping trade-worthy moves as we wind down the week are Thermo Fisher Scientific (NYSE:TMO), Intuit (NASDAQ:INTU) and Intercontinental Exchange (NYSE:ICE).
Big Stock Charts: Thermo Fisher Scientific (TMO)
With just a quick glance, shares of Thermo Fisher Scientific may look like they’re simply bouncing around, stuck in a sideways range. When you start drawing lines that connect all the recent highs to one another though, and all the recent lows, the picture gets surprisingly clearer. TMO just rocked its way out of a converging wedge pattern … in a bearish direction.
- The 200-day moving average line at $202.89 is still a last-ditch support level. If it fails to act as a floor, the selling effort could become unchained.
- Should a selloff take hold, there’s the potential for a tumble anywhere between $111.00 and $155.00. That was a turbulent area several years ago, and just as importantly, that’s where several key Fibonacci retracement lines await now.
- That being said, with a forward-looking P/E of 17.0, traders need to be prepared for any bottom to be made above that prospective “zone” of support.
Big Stock Charts: Intuit (INTU)
Credit has to be given where it’s due. Software giant Intuit has reliably grown the top and bottom line for years now, and is expected to continue doing so for the foreseeable future. The stock has moved in the same direction.
There are limits though, both fundamental and technical. With shares up 90% for the past two years and up 60% for the last year alone — and now sporting a frothy forward-looking P/E of 32 – that limit may have been reached. The tipping point in investors’ minds may have been reached on Thursday as well, given the shape of Thursday’s bar.
- With Thursday’s open above Wednesday’s high, and Thursday’s close above Wednesday’s low, Intuit shares created an “outside day” bar… a sign of a sudden, dramatic change of heart.
- Underscoring the likelihood of a pullback from this extremely overbought stock is the fact that at no point during the multi-year rally have we seen volume grow, If anything, we’ve seen trading volume shrink on the way up, suggesting a growing disinterest in the stock the more expensive it became.
- Given the scope of the uninterrupted rally since 2009, there’s no telling where any bottom would be made. It would likely be marked by another key reversal bar (like Thursday’s) that screams “capitulation.”
Big Stock Charts: Intercontinental Exchange (ICE)
Last but not least, though shares of Intercontinental Exchange have been as wobbly as most other stocks have been since February, investors seem to finally be realizing that trading activity is apt to remain brisk for the foreseeable future. Even though last month (which didn’t appear especially inviting from a trader’s perspective) drove record trading activity for Intercontinental Exchange in some key markets like futures, options and interest rate-based securities.
The end result? Traders have pushed ICE shares to the brink of a well-founded breakout thrust.
- The make-or-break ceiling is right around $75.80, where ICE shares peaked a few times since January. Breaking above that mark could trigger a long-awaited rally.
- At the same time, the 200-day moving average line has proven it’s a key support level, keeping Intercontinental Exchange in a good position to stage the brewing breakout effort.
- The fact that ICE shares have curled higher so far this week — while other stocks have mostly been sliding lower — is a subtle indication that this particular stock has captured the bulls’ hearts and minds. The market’s already hinting that it’s planned on, and mapped out, the breakout. It’s just a matter of getting and keeping ICE into the perfect position to make that happen, with the bulls not wanting to overplay their hand too soon and end up starting the move on a half-empty tank.
Any push past the ceiling around $75.80 would still only be a simple continuation of the uptrend that’s been in place since 2014.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.