It could have been worse. Rather than book the modest 0.04% loss that it took on Monday, the S&P 500 could have ended the day down closer to its intraday loss of 0.8%. Nevertheless, the market is clearly on the defensive here, dancing dangerously close to some pivotal support levels.
Advanced Micro Devices (NASDAQ:AMD) once again did the most net damage, losing 3.2% of its value as investors continue to grapple with the sheer weight of its story-induced gains. It was Square (NYSE:SQ) that suffered the biggest loss among the notable names, however, with SQ stock plunging 8.6% in response to BTIG analyst Mark Palmer’s warning that the company may be facing more credit risk than investors realize. Not even the 3.1% jump from General Electric (NYSE:GE), stemming from rekindled hope of a recovery, was enough to drag the broad market back into the black yesterday.
None of those names are particularly well-suited for speculative trading today, however. Rather, stock charts of Interpublic Group of Companies (NYSE:IPG), Devon Energy (NYSE:DVN) and Adobe Systems (NASDAQ:ADBE) are shaping up as the best bets. Here’s why, and what to look for.
Interpublic Group of Companies (IPG)
If Interpublic Group of Companies rings oddly familiar, there’s a reason. It was one of the names put under the trading microscope back at the beginning of the month. At the time, it was working its way into the tip of a converging wedge pattern, but it wasn’t yet clear in which direction it would be squeezed out of that pattern.
Thanks to recent bullishness that defies the market tide, we’ve got some new, compelling clarity on that front.
• It’s not just the move above a technical ceiling though. Underscoring the nascent bullishness is the flood of buying volume that’s materializes over the course of the past week and a half. The buyers appear to have tipped their hand.
• Should this breakout thrust take hold, there’s a significant technical ceiling around $23.60, where Interpublic Group of Companies peaked several times last year and early this year. This resistance is plotted in blue on the weekly chart.
Devon Energy (DVN)
Devon Energy has been something of an outlier of late. Although most oil and gas stocks have at least held their ground in sync with firm natural gas and crude oil prices, DVN stock has been fighting a losing battle. That battle moved to a critical tipping point on Monday though, and the tide looks decidedly bearish.
• Fanning the bearish flames is yesterday’s cross back under the 200-day moving average line, plotted in white, against a backdrop of decidedly strong selling volume. The accumulation-distribution line has been falling faster than the stock has since early August.
• As unlikely as a trip all the way back to that level seems at this point, the weekly stock chart suggests there’s something supportive about the $30 level.
Adobe Systems (ADBE)
Finally, while Adobe Systems has built an impressive business-minded software suite that drives lots of recurring revenue, this is one of those names that’s arguably gotten a little ahead of itself. Over the course of the past several months it hasn’t mattered. ADBE shares managed to find support when and where it needed to.
As of Monday though, those key lines in the sand are no longer keeping the selling effort at bay. One more decent drubbing and the weight of the gains since early last year may well unravel.
• One has to zoom out to the weekly chart to realize it, but we’ve been in the shadow of a bearish MACD cross since July, and with the Chaikin line’s cross below zero this week, we can confirm there’s quietly been a lot of profit-taking of late already. Nobody’s really buying in earnest at recent prices.
• Keep an eye on the 200-day moving average line, plotted in white on both stock charts. If the bears continue to charge, that’s the next-most-likely support level. If it fails, there’s no clear picture as to where the bleeding may stop.
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.