With a full weekend to think about it, most investors decided again on Monday that stocks were still too much of a liability. Though it spent some time in the black, the S&P 500 ended yesterday’s action at 2,750.79, down 0.59%, extinguishing budding hope for a rebound.
Bank of America (NYSE:BAC) did most of the net damage, off 1.6% by the time the closing bell rang, in response to a third quarter earnings report that was good, but not seen as good enough. Netflix (NASDAQ:NFLX) was a drag too, however. It’s got an earnings release on tap for later this week, Cornerstone Macro’s head of technical analysis, Carter Worth, cautioned that Netflix shares was vulnerable to another round of selling following that news. Most cannabis stocks were up firmly on Monday, but they don’t carry enough weight to prop the whole market up.
Truth be told, the selloff from Nvidia may be more of an indictment of the market as a whole and tech stocks as a group than about the company in particular. On the other hand, the reason doesn’t entirely matter.
What matters far more right now are the hints NVDA shares have dropped since late last week. They all point to trouble ahead, and the stock’s one bad day away from stumbling all the way over the edge.
Click to Enlarge • Last week’s move below the 200-day moving average line, plotted in white, is problematic. The clincher, however, is the way that NVDA shares tried to move back above that line on Friday, but failed to do so.
• Monday’s sizable loss seals the deal … almost. A move below Thursday’s low of $234.28 would be the back-breaker, so to speak.
• Zooming out to the weekly chart puts things in perspective. Nvidia shares have been struggling with the weight of big gains for some time now, and the move back under the 200-day moving average line could accelerate an existing slowdown.
Walgreens Boots Alliance (WBA)
Most of the time, a chart deserves the straightforward, simple interpretation. Right now though, there’s something a little more interesting about the chart of Walgreens Boots Alliance than its obvious bullish momentum.
Instead, it’s what didn’t happen beginning just a few days ago that’s quite telling. What didn’t happen is, the bears had every opportunity to undercut the budding rally, but couldn’t keep it down.
Click to Enlarge • WBA shares got hit hard on Thursday of last week, losing 3.5% of its value right off the bat in response to its fiscal-fourth-quarter earnings report. But, the stock’s been climbing ever since.
• In retrospect, the stumble may have been the best thing for the rally, which had gotten a little overheated. The big dip let WBA shares hit the reset button that ultimately allowed the stock to break above the ceiling around $74.50 that until Monday had been holding it back.
• The bullishness seen in just the past four weeks has carried Walgreens Boots Alliance shares above a falling resistance line that has tagged all the major peaks since early last year. It’s plotted with a red, dashed line on the weekly chart.
Finally, utility stock PPL has been one of the few stock charts that’s been under a constant watch since pivoting in June and confirming that rebound’s strength several times in the meantime. But, the slow, methodical improvement in the rally’s strength has merited frequent revisits. The bars for the past couple of days are ideally shaped and places for another round of buying that breaks down recently-developed ceilings.
The bulls just need to give it one more nudge.
Click to Enlarge • On Friday, PPL only had to kiss the blue 20-day moving average line to get an advance going. On Monday, it followed through.
• The next big line in the sand is near $31.00, plotted with a dashed blue line on the daily chart, where PPL peaked a couple of times of late.
• Backing out to the weekly chart, we can see the scope of the overblown setback suffered since the middle of last year and the potential for a rebound. If that big selloff was merely fear-based, stemming from concerns about rising interest rates, traders may be more ready to unwind the overreaction than it currently seems they are.
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.