Like Thursday, Friday was another raucous day for certain stocks. Unlike Thursday though, Friday’s volatility from certain names took a big bite out of the broad market. The S&P 500 lost 0.66% of its value that session, led by a 20% tumble from Twitter (NYSE:TWTR), and nearly a 9% selloff from Intel (NASDAQ:INTC). Earnings and outlooks were the culprit.
A few tickers tried to keep the broad weakness contained. Advanced Micro Devices (NASDAQ:AMD), for instance, advanced 3.2% after the company reported its best quarter in seven years, and on the heels of news that it would step up its competition with Intel in the data center arena … another part of the reason INTC struggled on Friday.
It just wasn’t enough.
The recent erratic action reminds us that even the most watched of stocks can dish out unfortunate surprises, underscoring the importance of looking for technically-sound trading setups. As the new trading week begins, stock charts of Goodyear Tire & Rubber (NASDAQ:GT), WestRock (NYSE:WRK) and Masco (NYSE:MAS) are shaping up as the top trading prospects.
Goodyear Tire & Rubber (GT)
Most of the time, a price jolt for a stock that alters its trajectory isn’t a good thing; it’s pretty rare that a one-day swing actually gets a new trend going.
The jolt Goodyear Tire & Rubber shares underwent on Friday, however, may well be the beginning of a much-needed turnaround. The stock was ripe for a reversal out of its downtrend. The bulls just needed the right catalyst, which may well have been Friday’s jolt.
Click to Enlarge • The volume surge on the daily chart, and the accompanying 8.5% gain, knocked the stock out of a downtrend … at least partially. If nothing else, the action garnered the attention of traders
• The weekly chart makes clear that GT stock has been guided downward by a falling resistance line (dashed) going back to the early part of the year. A move above that line, currently at $23.50, will send another clear message to would-be buyers.
• Don’t be surprised or worried if Goodyear Tire & Rubber don’t make an immediate follow-through. A few profit-takers will likely push back. It may take a few days for the bulls to regroup and start the second effort that gets the stock over the hump.
It’s not always easy to say for sure that a stock is caught in a technical downtrend that may well be fueling itself.
WestRock isn’t one of those instances though. WRK shares are clearly moving lower, with intent, and with a vengeance. Step in front of that train at your own peril, particularly if the stock makes a lower low early this week.
Click to Enlarge • The weekly chart shows the bearish trajectory, free of all the noise of the daily chart. Even on the erratic daily chart though, the downtrend is clear. The 20-day and 50-day moving average lines (blue and purple), both of which are sloped downward, have also both served as technical resistance, sending WestRock shares to even lower lows.
• There has been a clear lack of bullish volume of late, and an abundance of bearish volume. That’s evident on stock charts of each timeframe.
• The big line in the sand is $56.01, where the stock hit a low on Thursday and Friday, and near where it bottomed early in the month. If the stock slides below that mark, the bears might unleash another selloff like the ones we’ve seen a few times since the big pullback got rolling in February.
Last but not least, fans and followers of Masco seem to think the home improvement and construction company has something encouraging in store for its quarterly earnings report due Tuesday. How so? The stock’s slowly but surely working its way out of a downtrend and into a full-blown uptrend.
The budding uptrend doesn’t necessarily mean traders should plow in now; earnings announcements can wreak havoc on any chart. Still, the budding rally makes MAS a ticker worth watching as a potential trade after Tuesday’s earnings report
Click to Enlarge • In the daily timeframe, with the aid of a rising support line, MAS shares broke above the last bastion of technical resistance at $39.00 thanks to Friday’s strength.
• In the weekly timeframe, we recently saw a bullish MACD crossover … and MACD signals are rarely erroneous for Masco shares. Also note that the turnaround has been a slow, U-shaped effort. They tend to last longer than a sharp, V-shaped turnaround.
• Also on the weekly chart we just saw the Chaikin line cross back above the zero level, confirming the volume undertow has been bullish for a while even if the stock itself hasn’t been red hot just yet.
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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