For a while it was up, and for a while it was down. By the time Tuesday’s closing bell rang though, the market was basically where it started the day. The S&P 500’s close of 2897.52 was a scant 0.03% higher than Monday’s last trade, as investors once again hesitated to follow through on Friday’s and Monday’s advance.
It wasn’t a go-nowhere day for all names though. DSW (NYSE:DSW) jumped more than 20% on a surprisingly strong second-quarter report, while Ionis Pharmaceuticals (NASDAQ:IONS) fell nearly 16% on word that the FDA decided not to approve a drug very similar to the company’s Tegsedi, in trials right now.
That volatility largely excludes either of those from being compelling trade candidates as Wednesday’s action kicks off, though. Stocks charts of Hewlett Packard Enterprise (NYSE:HPE), PG&E (NYSE:PCG) and PepsiCo (NASDAQ:PEP) are the most enticing setups. Here’s a closer look.
If the name PG&E rings a bell, it may be because it was featured as one of the top three stock charts back on Aug. 17. At the time, PCG shares had just poked above the upper side of a converging wedge pattern.
The stock followed through in the meantime, but only for a day. It fell back below the lower end of the wedge pattern within a week. Thanks to Tuesday’s pop though, PG&E shares look like they’re over the hurdle for good.
Click to Enlarge • The pivotal line in question is the 200-day moving average line (white) at $44.63. PCG pushed above that line on Tuesday, and did so on higher volume.
• Zooming out to the weekly chart of PCG, we can see this uptrend has been brewing for a while. With a good foundation, the chart should be able to make a firm launch. Getting above the $45.90 level is arguably the biggest and most important step in that process.
• Once past $45.90, there’s not a particularly clear ceiling in sight until you get back to the $72-ish area where the stock peaked in September of last year.
Hewlett Packard Enterprise (HPE)
Although the technology sector has been all the rage of late within investing circles, Hewlett Packard Enterprise has largely been left out of that discussion. It’s not terribly surprising. The corporate-oriented arm of the former HP hasn’t made a lot of noise about its new self, and isn’t exactly a major cloud-service provider.
The market has slowly but surely taken notice though, realizing more than a few of the servers powering the cloud come from HP. There’s also the broad economic tailwind that’s (finally) prodding new investment in technological infrastructure. The undertow has prodded HPE shares above a key ceiling in decisive fashion.
Click to Enlarge • The technical resistance in question is the 200-day moving average line (white). HPE bobbed above and below it for the better part of this month, but each swing resulted in a higher high and a higher low.
• The volume behind the most recent wave of bullishness has been tremendous, telling observers that all the would-be buyers on the sidelines are starting to step in, encouraging others to do the same.
• It’s not chart-based, but the stock’s trailing P/E of 9.4 and forward-looking one of 10.9 leaves room for at least a retest of the previous peaks around $19.
Back on Aug. 9, it was pointed out that PepsiCo looked like it had made a major top. The shape and placement of that days bar — a doji that was placed well above the prior days bar, after a prolonged trend — was the red flag.
That signal did end up being a pivot. PEP shares have fallen from that day’s close of $117.38 to Tuesday’s last trade of $111.17. The pullback since then, however, has left PepsiCo on the verge of an even more serious support level. If it’s broken, the selling effort could accelerate.
Click to Enlarge • That technical floor is the 200-day moving average line (white). PEP just kissed it on Tuesday. If it fails to hold up as a floor, there’s no other plausible floor in sight until May’s low near $96.00.
• There’s plenty of volume behind the selling too. The daily chart’s Chaikin line has crossed back under the zero level, while the weekly stock chart’s accumulation-distribution line is also in a fresh downtrend.
• Though counterintuitive, news that PepsiCo is acquiring Sodastream International (NASDAQ:SODA) may actually be bearing down on PEP shares. It’s not entirely clear how, or even if, Sodastream helps the company solve its bigger issues, even if the mainstream media isn’t conveying those doubts.
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.