The market managed to log a respectable win on Tuesday, though the 0.37% gain the S&P 500 logged yesterday wasn’t exactly rock-solid. There were almost as many falling stocks as rising stocks, and almost as much bearish volume as bullish volume. We’re not out of the woods yet, especially in light of the fact that September is generally a bearish month.
General Electric (NYSE:GE) and Intel (NASDAQ:INTC) were the day’s biggest drags. GE ended the day 1.4% lower, with investors still processing the possibility that there’s more pain to come, while Intel lost nearly 3% of its value as investors were once again reminded that the chipmaker is simply being lapped by rival Advanced Micro Devices (NASDAQ:AMD).
There were clearly some winners though. AMD shares were up another fraction of a percentage point, and a whole slow of pot stocks dished out major gains again.
Trading blindly is still too dangerous of a game to play though. Stick with the most reliable and well-grounded stock charts, and make Walt Disney (NYSE:DIS), Albemarle (NYSE:ALB) and Hormel Foods (NYSE:HRL) your first looks on Wednesday. Here’s what to look at, and for.
Walt Disney (DIS)
For a short while late last week it looked as if Walt Disney might break free from its slump and rekindle the kind of bullishness seen following its late-May low.
With this week’s action in-hand though, it looks like the sellers aren’t done with DIS just yet.
Click to Enlarge• It’s alarming how all it took was a kiss of the blue 20-day moving average line on Monday to put the stock back in retreat mode. Even more alarming is how much downside follow-through took shape on Tuesday, when the stock made its lowest close in weeks.
• In retrospect we can see the pivot was actually the doji from Aug. 7. A doji is an open and close that are not only in the middle of the day’s range, but more or less in line with one another yet above the prior day’s close and above the next day’s. These bars often indicate a transitory equilibrium between a net-buying and a net-selling environment. Given the scope of the rally into the doji, though, the selling may not have run its full course just yet.
• The 100-day and 200-day moving averages line, both near $107, could halt any decline. As the weekly chart makes clear, however, DIS is more than capable of moving well below those long-term moving averages.
In early August Albemarle was playing with fire. Shares were testing a floor around $90, being pressed lower by a falling resistance line, plotted with a white dashed line on both stock charts. The outlook was grim.
That floor never snapped though. In fact, it ended up being a pushoff point, catapulting ALB shares above several key moving average lines just a few days later. In the meantime, those moving average lines have all acted as support, setting the stage for a recovery move that got much more serious on Tuesday.
Click to Enlarge • The convergence of the blue 20-day moving average line, the gray 100-day line and the purple 50-day moving average is telling in and of itself. Periods of low volatility are followed by periods of high volatility, and vice versa. With those three converge and in the shadow of a multi-month consolidation phase for ALB, they should start to diverge again. So far, the divergence appears to be in a bullish direction.
• This week we saw the Chaikin line cross above zero, confirming there’s more bullish volume than bearish volume.
• Zooming out to the weekly chart of Albemarle puts the whole matter in perspective. The stock’s finally making higher highs, but still has a great deal of room to recover before major highs are met again.
Hormel Foods (HRL)
Last but not least, back on August 16th Hormel Foods was suggested as a budding breakout candidate. It simply needed to fight its way above a technical ceiling around $38.00. That happened, though it wasn’t pretty. The initial surge was met with a steep dive. But, it only took a couple of days to get the second, longer-lasting rally in motion.
All good things must come to an end though. And, given the slowdown seen over the course of the past three days, HRL shares are in a position to hand out a sizeable wave of profit-taking.
Click to Enlarge• Instrumental here is the shape and location of Tuesday’s bar. It’s a doji, not unlike the one Disney shares made in early August.
• Notice that even though the stock has been drifting higher the past three trading days, volume has been thin. There aren’t many believers in the stock at this price.
• This signal needs a confirmation, which generally comes in the form of a loss. Preferably, that loss would materialize on Wednesday, and on higher volume.
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.