Thursday’s bounceback was seen as a fluke — a mistake — by some, but Friday’s bullish follow-through sent a loud and clear message that the market isn’t simply going to roll over. Down as much as 0.7% for the week on Thursday, the S&P 500 managed to hammer out nearly a 0.8% gain for the week.
And yet, it’s tough to pinpoint which names did Friday’s heavy lifting on Friday. The only name of consequence that headed meaningfully higher was DISH Network (NASDAQ:DISH), up 14.5% in response to its second-quarter report. It’s not exactly a heavy-hitter though.
Conversely, iQiyi (NASDAQ:IQ) shares tumbled 6.3%, dishing out some more rough action after releasing its Q2 numbers earlier in the week, while Symantec (NASDAQ:SYMC) fell almost 8% on disappointing fiscal Q1 revenue.
That big moves in both directions are a reminder to traders to take nothing for granted, limiting prospects to just the names with the soundest, best-developed setups. Heading into the new trading week, those appear to be Entergy (NYSE:ETR), Incyte (NASDAQ:INCY) and SL Green Realty (NYSE:SLG). Here’s why.
When Entergy reported better-than-expected second-quarter earnings last week, the stock jumped. But we’ve seen other such jumps of late, many of them failing to follow-through.
This one, however, is different in the sense that it’s part of a bigger-picture uptrend. Friday’s strength may have been the trigger for the next leg of that bullish journey.
Click to Enlarge • The technical ceiling that finally buckled on Thursday was $82.61, near where ETR had peaked a couple of times since May. It was Friday’s follow-up gain that largely sealed the deal though.
• On the daily chart, you can see there’s plenty of volume behind the recent bullishness, not just last week, but back from June when the rally first started to pick up steam.
• The advance is all part of a major (albeit volatile) uptrend that began back in 2015, and has been guided by a rising support line evident on the weekly chart.
The best chance Incyte has of snapping out of a long-standing downtrend came last week, on the heels of its second-quarter earnings report. But, it didn’t happen. Though revenue topped estimates and the outlook was compelling, traders couldn’t get past the earnings shortfall.
It’s that pessimistic response, and the context in which it was made, that bodes bearishly for INCY shares.
Click to Enlarge • A close look at the daily chart reveals Incyte shares were drifting lower to begin with headed into the report, suggesting the market was planning for the worst anyway. That same daily chart shows that the sellers came out of the woodwork before and after its second quarter numbers were posted, dragging INCY shares under May’s low of $63.58.
• The weekly chart shows that, realistically, a breakout wasn’t likely. Incyte shares have been guided downward by a falling resistance line since late last year, and a bump into that line as well as the 200-day moving average line (gray) was most likely to tip the budding rally over.
• A move below the mid-$61’s would pull INCY below its last plausible technical support, at which point the would-be bears could really start to dig in.
SL Green Realty (SLG)
Finally, most REITs have been doing better of late. After crumbling earlier this year largely in fears that interest rates would be catapulting higher, a more even-keeled Federal REserve has made it clear rates aren’t necessarily going through the roof. It’s also becoming clear that economic strength is supportive of the rents REITs charge their tenants.
Some of these REITs are taking on a more compelling technical shape than others though, and among the best of the best is SL Green Realty
Click to Enlarge • The uptrend is clearly evident on the daily chart, but more than that, the bullishness seen since February’s low is a rising converging wedge pattern that just saw its upper boundary snapped. That could prove to be fuel for the fire, with months’ worth of pent-up action now being unleashed.
• In the weekly timeframe, SLG shares have also broken above the falling resistance line that has forced the stock lower since early last year.
• Though the undertow is bullish and the act of being squeezed out of a converting wedge in a bullish direction sets the stage for more straight line movement, in both timeframes it should be clear that SL Green Realty is an erratic stock that takes one step back for every two steps it takes forward.
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.