The bulls came ready to charge when the trading week resumed yesterday, though we’d seen it before. Monday’s action was indeed different, though, in that the buying effort didn’t fade as the closing bell rang. Volume was pretty brisk too. Maybe this is the tailwind the market’s been waiting for.
Today’s action will at least partly answer to the question.
Doing the most heavy lifting yesterday were Tilray (NASDAQ:TLRY) and Cronos Group (NASDAQ:CRON). Cronos jumped 21% and Tilray was up nearly 22%, but both jumped for the same reason. Each is a marijuana play, and both stocks continue to be featured as top ways to tap into the growing legal cannabis movement. It’s the kind of action that leaves little room for follow-through though … or at least not enough certainty to make them worth the risk of trading.
Rather, it’s stock charts of Advanced Micro Devices (NASDAQ:AMD), DowDuPont (NYSE:DWDP) and U.S. Bancorp (NYSE:USB) that hold the most plausible potential heading into today’s action.
Advanced Micro Devices (AMD)
Few stocks have performed as well as Advanced Micro Devices has of late. AMD is up more than 150% just since early April in response to an impressive turnaround from the company. Everything has its limits though; nothing lasts forever.
Not all Advanced Micro Devices fans and followers want to believe this rally has run its course. But, yesterday’s action — the shape of the bar itself as well as the volume behind it — suggests the rally has indeed run its course, ending with a proverbial “last hurrah.” For the time being anyway, the profit-takers have an opening, and lots of room to run.
• Monday’s volume surge is also a red flag. It indicates the last of the panic-induced buying, but equally hints at the beginning of profit-taking en masse.
• Above all else, the shape of yesterday’s bar says the underpinnings for the stock shifted from net-buying to net-selling. The open and close were both near the low of a very tall bar. That hammer shape generally indicates a pivot (and especially so with a gap in the rearview mirror).
A week ago DowDuPont was pegged as a budding breakout candidate. But, DWDP shares have a major technical hurdle to clear before being fully freed up to make that brewing run.
The stock cleared that ceiling on Friday, and thanks to Monday’s gain has already pushed its way above another one.
• Underscoring the recent bullishness is growing bullish volume, suggesting there are more and more would-be buyers waiting on the sidelines willing to buy the stronger the stock proves itself.
• Zooming out to a weekly chart of DWDP, we can put the new rally effort in context. Even with recent gains, the stock has only cut into about half of the pullback suffered earlier this year. There’s more room to reclaim, and the sideways action since April was coiled the spring nicely. It’s not uncoiling.
U.S. Bancorp (USB)
Finally, a month ago U.S. Bancorp shares had just poked above a horizontal ceiling that had kept it at bay for months. One day does not start or stop a trend though, and only time would tell if the effort was going to take root.
It did. But, more than that, it looks like it’s got legs and could continue on for a while.
• The 200-day moving average line (white) has been cleared in the meantime.
• Though U.S. Bancorp has fought its way past some major resistance, the rally is slowing down a bit. It may need to pull back first and reset itself for resuming. Ideally the 200-day moving average line or the 20-day moving average line will serve as floors, stopping and reversing any lulls.
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.