Another day, another tractionless slog. Small caps did alright, and large caps showed up, with the S&P 500 edging out a very slight gain of 0.18%. The blue-chip Dow Jones Industrial Index, however, finished the day just a tad in the red, with many traders still unsure about what Q2’s earnings season holds in store.
The lethargy was far from universal though. Tesla (NASDAQ:TSLA) lost a little more than 3%, with whispers now circulating that CEO Elon Musk may be asking suppliers for some refunds as a means of collecting some cash. Meanwhile, Paypal Holdings (NASDAQ:PYPL) shares improved to the tune of 2% on the heels of news that activist investor Dan Loeb is taking an interest, suggesting PYPL shares are priced at only half their arguable value.
As for Tuesday’s top trading prospects, look to Western Digital (NASDAQ:WDC), Deere & Company (NYSE:DE) and Host Hotels and Resorts (NYSE:HST). Here’s the deal.
Western Digital (WDC)
Broadly speaking, investors have known a glut in the computer storage/memory market is forming. Although it’s difficult to say it’s here in full force, it’s difficult not to say it’s on the horizon.
Western Digital is already suffering the impact of that concern. Yet, given how the downtrend is a slow-building, acceleration-gaining move, things are likely to get worse before they get better. This is shaping up much like 2015’s meltdown.
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• On that same monthly chart, not only do we already see a bearish MACD cross, both the 100-day and the 200-day moving average lines (gray and white, respectively) are pointed lower, suggesting the undertow has been and still is bearish.
• Though WDC shares managed to fight their way back above the technical floor at $76.12 on the daily chart yesterday, the attack on that floor is telling in and of itself. That support line may not hold up as well if it’s pressured again.
Deere & Company (DE)
Like most stocks, Deere & Company shares ran into a headwind early on in the year. Unlike most other stocks though, DE shares haven’t latched onto a tailwind in the meantime. Thanks to yesterday’s 1.2% dip, Deer shares are back within striking distance of new multimonth lows, with a head of steam behind the selling.
The frustration for bulls? There’s no lack of value, nor a lack of growth. The forward-looking P/E is just a bit higher than 11, and sales are expected to grow 30% this year, driving a similar improvement in earnings. That’s not going to stave off a short-term pullback though.
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• There’s plenty of selling volume behind the pullback too, implying there are lots of doubters and would-be sellers still waiting in the wings.
• The monthly chart’s huge 2017 rally, in retrospect, explains how there’s so much profit-taking potential now. In fact, on the monthly chart we’re now moving in the shadow of a bearish MACD cross.
Host Hotels and Resorts (HST)
Finally, though things looked a little hairy for Host Hotels and Resorts in June (with the REIT starting to peel back from a big April/May rally), the chart has taken a turn for the better.
It’s not just that shares are edging higher again, however. It’s how they made the turn that implies the budding uptrend could last a while and repeat the kind of prolonged moves we saw in April and May. Never even mind the fact that the longer-term uptrend has been and remains bullish.
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• There’s plenty of volume behind the renewed uptrend as well, as evidenced by the way the accumulation-distribution line and the Chaikin line have both turned higher again. The Chaikin line has even worked its way above the zero level, saying the volume trend has turned back to a net-bullish one.
• The longer-term uptrend is framed on the monthly chart. There’s still lots of room to keep rising, as the 100-day and 200-day lines (gray and white, respectively) have only recently been crossed above again.
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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