The bulls were charging with a vengeance when Friday’s action started, but by the time the closing bell rang, stocks barely managed to remain in the black. There were more losers than winners on Friday.
Indeed, it’s a miracle the market was even able to do that. Influential powerhouses like Advanced Micro Devices (NASDAQ:AMD) and General Electric (NYSE:GE) both ended the day in the red … and by more than a little. The day’s biggest winners? Largely unfamiliar names.
As the new trading week begins, Walmart (NYSE:WMT), Cisco (NASDAQ:CSCO) and State Street (NYSE:STT) are shaping up as the most compelling trading prospects. Here’s a detailed look at what’s working, and what’s likely to come, for each.
Back in January, Walmart shareholders were thrilled with their recent gains. By the next month, they were horrified by how quickly the tide turned.
As it turns out though, not only did the sellers overshoot, they’re now starting to think there was never a real reason for any selloff. It’s the rebound move that presents a trading opportunity for newcomers.
• The shape of the turnaround from May’s lows is critical. It wasn’t a sharp, V-shaped reversal. Rather, it was slow, methodical U-shaped reversal, evidenced by the 20-day moving average line’s recent cross above the 50-day line and its impending move above the 100-day line.
• Clearing the 200-day moving average line would further seal the deal of the recovery move. And, as the monthly chart makes clear, WMT shares are no stranger to surprisingly big moves.
There’s nothing wrong with Cisco as a company. It’s still the networking king of the world, and though lots of competition has crept into the market, it’s still the name in the business. And, it has got nearly $60 billion in the bank; it can buy whatever innovation it needs.
Friday’s 4% setback sparked by news that Amazon.com (NASDAQ:AMZN) was getting into the networking business, though, wasn’t as much about Amazon as it may seem on the surface. Weakness was brewing long before that. The news, however, may finally push CSCO shares over the edge of the cliff.
• Friday’s selling volume surge points to a growing number of doubters, though a look back through March reveals several high-volume “distribution” days without very many high-volume ‘accumulation’ days.
• The 20-day moving average line has recently crossed below the 50-day and 100-day moving average line, saying at least the near-term momentum has turned bearish.
State Street (STT)
State Street shares have been trending lower since February. That’s not the end of the world, but that’s also not the alarming part of the story. What’s alarming is how close the stock is to going from bad to worse.
• The converging wedge pattern could also squeeze State Street shares into a bullish thrust, if the upper boundary of the wedge ends up not keeping a rally move contained. But, in light of all the bearish crosses we’ve seen from all the key moving average lines (highlighted in yellow) confirms the weakness is gaining strength in multiple timeframes.
• On the monthly chart, the Fibonacci retracement line at $88.46 could serve as a floor, and become a reversal point. If it doesn’t hold up as a floor though, there’s not another support area until $73.12. Both levels were semi-significant lows last year.
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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