The market was up for a while yesterday, and down for a while. When all was said and done though, Wednesday’s action was basically a breakeven. The S&P 500’s close of 2857.70 was a mere 0.03% below Tuesday’s last trade.
And, for a nice change, most stocks were relatively tame yesterday… most. A couple of them got a little squirrely though. Snap (NASDAQ:SNAP), the parent company of Snapchat, plunged 6.8% as the market digested a quarterly report that showed a shrinking user base. Rite Aid (NYSE:RAD), conversely, was up a little more than 1% during regular-hours trading, but was up more than 2% in after-hours trading following news that it wouldn’t be merging with grocer Albertsons. Rite Aid needs a lifeline, but that’s not the right one.
Neither are shaping up as one of today’s top trading prospects, however. The creme of the crop stock charts here are American International Group (NYSE:AIG), PepsiCo (NASDAQ:PEP) and Hilton Hotels (NYSE:HLT). Here’s the deal.
American International Group (AIG)
American International Group shares have been trapped in a sideways trading range that extends back to April… a pretty tight, well-established one.
Just within the past few days though, the lower edge of that trading range has been put under significant pressure. One more bad day could break the floor and start a selling chain reaction.
Click to Enlarge • The daily chart plots the trading range from $52.33 to $55.80, both of which have held as a floor and ceiling (respectively) several times since April.
• Though AIG shares haven’t broken under their technical support level yet, there has been abnormally high volume for the recent leg of weakness. With this many bears already tipping their hand, it wouldn’t take much more weakness to tip the scales all the way over.
• Zooming out to a weekly chart of American International Group shares, we can see the stock just broke below the lower boundary of a converging wedge shape.
How does the old saying go? Buy the rumor, sell the news? It’s an adage that points to the fact that sometimes an event can exacerbate a trend right into a peak frenzy. And, it works both ways — sometimes, the right move is selling the rumor and buying the news.
PepsiCo stock may have just gone through such an event. On Monday, traders surged on news that CEO Indra Nooyi was stepping down, to be replaced by Ramon Laguarta. It would be a short-lived surge though, which is telling in and of itself.
Click to Enlarge • The open and close were both near the lower end of that day’s range, suggesting a pivot from a net-bullish to a net-bearish environment.
• On Tuesday, the bears took firm control, confirming Monday’s bar was indeed a pivot. The sellers followed through on Wednesday, further confirming the turn into a downtrend. PEP shares are now both below the 20-day moving average line for the first time since May.
• Another “down” day — or maybe two — would create a bearish outside/engulfing bar, confirming the reversal out of the impressive-but-now-overbought rally from May’s low.
Hilton Hotels (HLT)
Finally, Hilton Hotels has been drifting lower for a while now… albeit erratically, and modestly. In fact, the lull has been so modest and inconsistent that it’s difficult to see things are going from bad to worse.
Thanks to Wednesday’s weakness though, HLT shares are within reach of a crucial breaking point. One more loss could end up pushing the stock past the proverbial tipping point and accelerate the selling effort.
Click to Enlarge • The big line in the sand for Hilton Hotels is $77. That has not been the absolute low of late, but it has been the most commonly found low. The stock pulled below that line on Wednesday, and actually closed under it. It’s not made a decisive move below that support level though.
• Note on the daily chart just how tall the red, bearish volume bars have been of late. There are a lot of sellers out there testing the waters, and even more could crawl out of the woodwork if they become terrified that a breakdown is brewing.
• In the weekly timeframe, the 100-day moving average line (gray) is on the verge of breaking below the 200-day line (white) for the first time in a couple of years. Crosses of the long-term moving averages don’t happen often for HLT, but when they do, it’s usually an accurate signal.
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.