Ouch. That was painful to say the least. The S&P 500 lost 3.1% of its value on Wednesday, while the Nasdaq Composite tumbled 4.4%. The irony? The severity of the selloff may also be an indication that we’re near, if not at, a significant low.
It’s not easy to assign blame, as so many stocks took on a massive amount of water. Netflix (NASDAQ:NFLX) was off by 9.4%, and Advanced Micro Devices (NASDAQ:AMD) fell 9.2% during regular-hours trading before falling in after-hours trading in response to disappointing revenue guidance.
It wasn’t all misery though. Somehow a handful of names — about 20% of the market’s listed names, in fact — managed to move forward today anyway, despite the headwind. Varian Medical Systems (NYSE:VAR) was the biggest gainer among the S&P 500’s stocks, up 7.8% after posting a fiscal-fourth-quarter revenue beat. There just weren’t enough moves like that to do the broad market much good.
The sheer size of the pullback makes it tough to make sense of most stock charts, which were likely jolted out of any budding trends. But, for those willing to dig deep enough, yesterday’s volatility may have actually put some new trends into motion. The stock charts of Pfizer (NYSE:PFE), Philip Morris (NYSE:PM) and Dominion Energy (NYSE:D) are shaping up as your top bets. Here’s why.
Interestingly, Pfizer was one of the few names that hadn’t been part of the recent marketwide weakness that took shape at the beginning of this month. Rather, it had found a way to hold on to its outsized gains reaped since July.
The stock may have finally buckled, however. Yesterday’s 3.7% setback dragged PFE below a key support line, and at the same time several bearish hints were underscored.
• A careful, closer inspection of the volume bars makes clear that the buying volume has been tepid for a few days now, while the selling volume has been firm.
• One has to zoom out to a weekly chart of Pfizer to appreciate just how big the rally from July’s breakout was. There’s not much support to look for until we get back to the $36.00 area.
Dominion Energy (D)
It has probably got more to do with the perceived need for a “flight to safety” than it does with Dominion Energy, but the cause doesn’t entirely matter. D shares have cleared another significant technical hurdle, and they’ve done so in the shadow of several important technical cues. It’s going to be tough to slow the budding rally down at this point.
• The foundation for the breakout thrust is about as firm as a bullish thrust can be. D shares pushed up and off of the gray 100-day moving average line in late September, and in the meantime we’ve seen several bullish crosses of key moving average lines. All events are highlighted on the daily chart.
• The weekly chart indicates an even bigger, better-founded breakout thrust above a major technical ceiling at $72.60, plotted with a white dashed line on both stock charts. The consolidation under that resistance since July serves as a big wind-up for the traction being gained now.
Philip Morris (PM)
Last but not least, it’s likely to be another rally that’s got more to do with the market environment than the company itself. But, cigarette maker Philip Morris is nudging its way higher, and just took a big poke at a major resistance level… and did so with a lot of bullish momentum in tow. One more good day could do the trick.
• Helping to establish the momentum needed to carry the stock over the 200-day average line is the growing degree of bullish volume.
• Philip Morris was soundly crushed in the latter half of last year and early this year, leaving lots of room for a recovery move now.
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.