Investors came back from the holiday break in an optimistic mood, continuing Wednesday’s fireworks with some bullish fireworks of their own on Thursday. With the fears of an all-out trade war abating, the S&P 500 ended the session up nearly 0.8%. Facebook (NASDAQ:FB) led the way with a gain of almost 3% following a big increase in BTIG’s price target. Netflix (NASDAQ:NFLX) wasn’t far behind, though, with its 2.0% gain.
The advance didn’t necessarily leave all stocks testing the waters of higher highs though. Recently IPO’d iQIYI (NASDAQ:IQ) tumbled to the tune of 5.4%, with another wave of profit-taking taking another toll.
If PepsiCo seems more than a little familiar as a trading suggestion, there’s a reason. The beverage giant was one of Tuesday’s top prospects.
Nothing has fundamentally changed in the meantime. But, the chart has taken a shape that merits a closer look.
Click to Enlarge • The current uptrend is ultimately rooted in the doji pattern made by May’s bar, where the open and close are both near the high, book-ending a relatively long “tail.” The volume surge that month underscores the capitulatory transition from a net-bearish to a net-bullish environment.
• Within the past couple of weeks, PEP shares have formed — via their highs and lows — a rectangle pattern. This isn’t hollow stagnation. This is the proverbial calm before the storm, setting the stage for a breakout thrust from the containment range.
• It’s subtle, but a close look at the daily chart makes it clear that the bulls are OK with keeping the stock’s close above the 200-day moving average line. If the market was going to go into retreat mode at that pivotal long-term line, it likely would have happened by now.
Regions Financial (RF)
Though Regions Financial shares have been fighting a losing battle since March, they were at least fighting a battle. As of this week though, the stock finally buckled, losing that battle. With no fight left, the last of the lingering bulls are finally throwing in the towel.
Click to Enlarge • With Thursday’s loss, RF shares are now below the 200-day moving average line as well as below a support line that had formed the lower edge of the trading range that’s been in place since February.
• Just as bearish as the technical breakdown is the amount of volume behind the bearish days that pushed Regions Financial shares over the edge. The Chaikin line, already well into negative territory, has been decidedly pointed lower for weeks now.
• Should the breakdown continue to gain momentum, there’s a plausible downside target of $12.78, near where the stock found a floor a few times last year.
Juniper Networks (JNPR)
Last but not least, Juniper Networks has been stuck in neutral for the past couple of years, largely in step with the hardware company’s revenue. And, it may well still be trapped in a sideways range. Given the shape of the long-term chart though, we may be on the verge of a breakout thrust that ‘makes up for lost time.’
Click to Enlarge • The broad advance from the 2012 low has been repeatedly and reliably supported by a rising support level. JNPR shares just pushed up and off that line, in fact. This pushoff is a little bit different though, in that the move has pushed the stock to within striking distance of a falling resistance line that tags all the major — and lower — highs since mid-2017.
• If the upper boundary of the narrowing trading range broke, the prior peaks around $30 could be a ceiling again. If they fail as resistance though, there’s not another technical ceiling until you get above $40.
• The clincher for the uptrend is the fact that the 50-day moving average line just crossed above the 200-day moving average line, and a renewed upturn from the daily chart’s Chaikin line.
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.
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