The market managed to hammer out a solid 0.9% rally on Wednesday, but it’s not quite clear how. Of the day’s biggest winners, none of them were market-leading names. On the flipside, a handful of the day’s biggest losers were well-known tickers. AT&T (NYSE:T) was chief among them, losing more than 4% of its value on a mixed earnings report.
Still, enough of the right names posted healthy, above-average advances. Facebook (NASDAQ:FB) and Amazon.com (NASDAQ:AMZN) each dished out positive results during the day Wednesday (though FB took a hard turn after their after-hours earnings report). Quantity counts too, in the absence of quality. (It doesn’t hurt that both are simply enormous companies, giving them a little extra clout.)
Whatever the case, wise traders continue to play things close to the vest, treading lightly. Stock charts of Capital One Financial (NYSE:COF), GGP (NYSE:GGP) and Bank of New York Mellon (NYSE:BK) are shaping up as the most reasonable, level-headed plays for Thursday.
Big Stock Charts: GGP (GGP)
GGP, for the record, is a REIT. Most of the company’s properties are retail space … an arena that took on plenty of water earlier in the year, in the shadow of threats of rapidly rising interest rates.
In retrospect though, investors are starting to realize not only was that selling erroneous, the robust economy is actually rekindling the retailing industry. The bulls are starting to trickle back in again in a big way, but there’s still plenty of room to keep moving higher.
Click to Enlarge • The intraday action just from the past few days is telling, and bullish. Though the big, high-volume gain that began last week was encouraging, it was also inviting to profit-takers. They took their shot yesterday, but failed to attract any follow-through. Wednesday’s big bounceback was a clear message to the bears that the buyers aren’t playing around here.
• Zooming out to a weekly chart, we see a more gradual (read “sustainable”) turnaround that has actually been in place for several weeks.
• If GGP shares can hurdle the 200-day moving average line at $21.50, then note the potential technical resistance at $22.83. The stock struggled with that ceiling for several weeks in a row late last year and early this year.
Big Stock Charts: Bank of New York Mellon (BK)
In retrospect, Bank of New York Mellon could have spun last quarter’s results a little better than the company did when the numbers were released a week ago. Though it’s admirable to be honest about the long-term impact of client losses, the CEO’s suggestion to BK shareholders that they simply need to be patient didn’t go over all that well.
Yes, BK shares bounced back a little following the post-report plunge, but the longer the market had to think about it, the more they decided holding the stock wasn’t worth the risk. The subsequent pullback looks like it’s turning into a full-blown downtrend.
Click to Enlarge • The 100-day moving average line (gray) is on the verge of pulling under the 200-day line (white), and the 20-day moving average line has already done so. They’re all also sloped downward now, confirming the trend is bearish in multiple timeframes.
• Slowly but surely, the tide has been turning bearish anyway. On the monthly chart, the Chaikin line has moved back below zero — confirming the volume tide has actually been bearish for a while, and a MACD crossunder materialized a couple of months ago even if it doesn’t appear shares themselves have slipped into selloff mode.
Big Stock Charts: Capital One Financial (COF)
Finally, periods of low and converging volatility are followed by periods of high or divergent volatility. In other words, things get dicey following periods of lethargy, and things get lethargic when they get stressed, or tense.
Capital One Financial shares have just worked their way into period of little to no movement, setting the stage for an expansion of daily volatility. It just so happens it looks like the rekindling of wild movement is pointed in a bullish direction.
Click to Enlarge • The convergence of all the key moving average lines right around $95.30 is the convergence of volatility. From here, those lines will start to separate, with months of pent-up trading activity poised to be unleashed.
• The daily chart has crossed above an intermediate-term resistance line (dashed) as of late last week.
• The recent pushoff from the stock on the weekly chart was founded on a rising support line that has tagged all the major lows going back to 2016, and is underscored by a new bullish MACD crossover.
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.
“Financial Anomaly” to Trigger Windfall Profits
As you read this, a rare set of events has created what we believe will become one of the three biggest investment opportunities of your life, no matter when you were born.
This “financial anomaly” could a trigger a financial boom that will hand investors 10x gains … 20x gains … even some 50x gains.
This boom will take place in the legal marijuana business.
If you missed the opportunity to make 50 times your money in internet stocks … or if you missed out on the opportunity to make 50 times your money in bitcoin, you’re going to want to know exactly what’s going on here.