Plenty of trading action on Thursday. Facebook (NASDAQ:FB) plunged 19% in response to an alarming slowdown in growth, while Advanced Micro Devices (NASDAQ:AMD) rallied 14% (and continued to edge higher in after-hours trading) after the tech company swung to an impressive second quarter profit. And, though not many other stocks dished out that kind of volatility, a bunch of others managed to make oversized moves … in both directions.
In the end though, the winners and losers mostly cancelled on another out. The S&P 500 ended the day down to the tune of 0.3%, while the tech-heavy Nasdaq lost 1% of its value. The blue-chip-rich Dow Jones Industrial Average, on the flipside, advanced 0.44% mostly thanks to the 2% romp from Walt Disney (NYSE:DIS). Investors are still stoked about the potential of its tie-up with Twenty-First Century Fox (NASDAQ:FOXA).
Moral of the story: Every name out there is still more than capable of doing its own thing.
To that end, U.S. Bancorp (NYSE:USB), DowDuPont (NYSE:DWDP) and Mcdonalds (NYSE:MCD) are shaping up as the better bets, not so much because they’re explosive, but because they’re working on better-founded moves. Take a look.
This year hasn’t exactly been a thrilling one for DowDuPont shareholders. Though the impending breakup of the company is a step in the right direction, investors know the company, like the industry, faces some inflationary and competitive issues.
A quick glance at the daily chart isn’t exactly compelling either.
When one takes a step back and looks at the weekly chart though, a couple of hints say the underlying trend has subtly taken a bullish turn.
• The current bullish pushoff was kick-started at a well-established support line that tags all the key lows made since April.
• In both timeframes, the volume and momentum trend have turned decidedly positive. There’s still plenty of room to recover some of what was lost earlier this year.
Mcdonalds shares tumbled, albeit modestly, following the release of its second-quarter earnings on Thursday. They weren’t horrifying, but they weren’t as robust as expected (and investors weren’t expecting much).
The weakness didn’t push MCD stock over the proverbial cliff, but it did drag the stock to the brink of a more serious breakdown. One more bad day could tip the scales all the way over to outright bearishness.
• On the daily chart, you’ll also see that just within the past couple of weeks, the worst days have been marked by increasingly higher volume. More and more sellers are coming out of the woodwork.
• The bigger-picture undertow has actually been bearish for a while, and is well developed. The weekly chart shows is a bearish MACD divergence is underway, and the Chaikin line has been below zero — and trending lower — since May.
U.S. Bancorp (USB)
Finally, U.S. Bancorp has been working on a breakout above a technical ceiling at $51.84 since April. So far though, it has just been too tough. Everything changed for the better on Thursday, with USB finally getting above, and staying above, the resistance.
• After being trapped below a clear resistance level and only trading sideways for the past four months, some pent-up trading action is apt to be released; the proverbial spring is coiled, and is ready to uncoil. A new test of January’s peak near $58.50 is ultimately on the table.
• This is a situation, however, that calls for one final confirmation that the budding uptrend has actually developed. After the bears push back, the bulls need to pull the stock back above the technical ceiling at $51.84 and get the rally going in earnest again. The slower (and more sustainable), the better.
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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