Another day, another drubbing, though Thursday’s beat-down wasn’t quite as rough as Wednesday’s. The S&P 500 fell another 2.06% yesterday, dragging the market further into multiweek-low territory.
Square (NYSE:SQ) was the day’s big loser, off 10.9% on news that its CFO was stepping down. Nvidia (NASDAQ:NVDA) may have done the most overall damage to the broad market, however, falling 4.3% as investors continue to question whether or not the frothy valuation makes sense … particularly in light of the marketwide “reset” presently underway.
The unusually bearish action has made trading particularly tricky, as nearly all stock charts are pretty well rattled and therefore difficult to read. Stock charts of Cisco Systems (NASDAQ:CSCO), Weyerhaeuser (NYSE:WY) and Rockwell Collins (NYSE:COL), however, may be some welcome exceptions to that current norm. Here’s a closer look.
Cisco Systems (CSCO)
Cisco Systems shares have suffered the same basic fate as other stocks have this week so far.
But, in a couple of key ways CSCO shares are differing from the rest of the market. If the market doesn’t remain in meltdown mode, this stock is well-positioned for a big bounce.
Click to Enlarge • The selloff from Cisco stopped just short of the 200-day moving average line, plotted in white on both stock charts. The fact that a big reversal took shape at the same line in August makes this instance a notable one.
• This scenario is different than the August one, however, as the level of selling volume is growing. The sellers are crawling out of the woodwork.
• If the 200-day line fails to hold up as a floor, there’s no clear next-best support area. But, the July low around $41.21 is the next best bet. Just bear in mind that we might see a brief bounceback from Cisco stock before the 200-day average ultimately buckles.
Back on Sept. 17 we took a look at Weyerhaeuser, pointing out how it was hanging by a thread. If its support at $33.96 broke, then the selling floodgates could be opened wide. That happened. Two days later that technical floor failed, allowing a 16% rout to materialize between then and now.
Yet, as bearish as the momentum appears to be, Weyerhaeuser is a name that may be on the cusp of a bounce.
Click to Enlarge • WY shares are decidedly oversold. The weekly chart’s stochastic indicator is deep into oversold territory, but even without the stochastic plot, the scope of the recent selloff is stunning… maybe even to the point of being unsustainable.
• Much of the pullback Weyerhaeuser shares have dished out in recent weeks is in response to an apparent slowdown in the housing construction market. But, August’s starts jumped to 15-month highs. The pessimists arguably overshot.
• While ripe for a rebound, this is a possibility that requires clear clues of a technical reversal before taking that swing.
Rockwell Collins (COL)
Finally, just because a stock managed to make a gain on Thursday against the market tide doesn’t inherently mean it’s something to buy into now. On the other hand, it certainly doesn’t hurt.
Either way, the shape and placement of Thursday’s bar certainly makes Rockwell Collins a standout possibility as Friday’s trading begins. It’s got many of the telltale signs that a pivot from a pullback is in the works.
Click to Enlarge • It’s something of a reverse/mirror outside day. Thursday’s open-to-close range was contained within Wednesday’s close-to-open range, but yesterday’s high-to-low range was above and below the prior day’s high-to-low range. This is a hint that traders are wrestling with a transition from a net-selling to a net-buying environment, when coupled with the volume surge.
• Bolstering the bullish case is the fact that Thursday’s low revisited an established support level evident on the weekly chart. It’s plotted with a yellow, dashed line.
• As was the case with Weyerhaeuser, if Thursday’s hints from COL are to serve as a pivot, they will require some sort of confirming bar that convince would-be buyers a bottom has been made.
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.