The market mustered a gain on Friday, but it was a squeaker. The S&P 500 spent the better part of the day in the red, after spending all of Thursday in the red. And, had it not been for Lululemon Athletica (NASDAQ:LULU), the market may not have even been able to do that. LULU shares gained more than 13% on an unexpectedly strong second quarter report.
At the other end of the spectrum, Ford (NYSE:F) fell 2.3%, while software outfit Zuora (NYSE:ZUO) saw its stock plummet nearly 19%. The carmaker’s setback came in response to news that newly imposed tariffs would prevent it from importing one of the vehicles it makes in China and selling it in the United States. Zuora, meanwhile, tanked on a rather disappointing second-quarter report.
None of those names are well-suited for trading as the new (and shortened) trading week begins. Headed into Tuesday, traders will want to keep a close eye on the stock charts of Schlumberger (NYSE:SLB), Fortune Brands Home & Security (NYSE:FBHS) and Laboratory Corp. of America (NYSE:LH). These three names offer the most reliable chart patterns here in an uncertain environment.
Laboratory Corp. of America (LH)
In looking at nothing more than the last few days of trading for Laboratory Corp. of America, it would be easy to come to a bearish conclusion. Yes, the stock managed to rebound a little on Friday, but there still seems to be an undertow, with the stock peeling back from its mid-June peak.
When you take a step back and look at what’s happened each of the last several times LH shares have encountered the 200-day moving average line, though, and you have to at least acknowledge that a bigger rebound may already be underway.
• Just as reliably as the 200-day line has acted as a floor, all the major peaks for over a year now have materialized at a well-defined resistance line (red, dashed). That ceiling will be roughly at $190 by the time it could be tested.
• If the 200-day moving average line fails to hold up as a floor though, there’s little that will be able to stop the bleeding soon, or easily.
Fortune Brands Home & Security (FBHS)
With just a quick glance at the chart of Fortune Brands Home & Security shares, it appears the stock is at least trying to gear up for a bounce. And, maybe that’s exactly how things will shake out.
Would-be buyers or current owners may not want to count their chickens before they’re hatched though. FBHS stock wasn’t “just a little off” last week. That lull has dragged Fortune Brands Home & Security dangerously close to a major support level, and more than a few bears showed their true colors.
• While volume for more stocks — and for the market as a whole — started to fade last week as the weekend approached, not so with FBHS. The bearish volume was actually growing as the trading week came to a close. The bears are clearly out there, and ready to pull the trigger.
• If that support line snaps, the next-best bet is the low from early 2016, where Fortune Brands Home & Security shares made a major short-term bottom in early 2016 before starting a huge run-up.
Last but not least, at first blush Schlumberger just looks choppy. And, maybe that’s all it is. Friday’s decided selloff underscores a well-developed downtrend, however, that has brought the stock within striking distance of a major floor. If it breaks, it could open the floodgates to a strong wave of selling.
• A look at the daily chart also makes clear that the worst (most bearish) days of last week were high volume ‘distribution’ days. Many sellers have already tipped their hand, pushing the accumulation-distribution line to multi-month lows.
• Not much lower than $61.83 is a support level that tagged the two major lows going back several years … $59.47. If that line in the sand is also breached, the move into new 52-week-low territory could inspire even more selling.
As of this writing, James Brumley held a long position in Ford. You can follow him on Twitter, at @jbrumley.