The initial response to news that a trade deal among North American countries had been made was bullish. It wasn’t meant to last though. By the time Monday’s closing bell rang, the S&P 500 intraday peak gain of nearly 0.8% had been pared back to a gain of only 0.36%. The Nasdaq Composite, meanwhile, was dragged all the way back into the red to log a 0.11% loss for the day.
The curious part: None of the notable losers were what might be considered market stalwarts. Yet, some big-time names managed to dish out sizeable gains. General Electric (NYSE:GE) jumped a little more than 7% on news it was replacing CEO John Flannery with former Danaher (NYSE:DHR) CEO Lawrence Culp. Tesla (NASDAQ:TSLA) shares, meanwhile, jumped 17% in response to the fact that Elon Musk had settled with the SEC, which was prepared to sue after the CEO falsely claimed he had lined up financing to take the company private. Better still (to some investors anyway), Musk is stepping down as chairman of the board, though he won’t have to resign as the company’s chief.
None of those stocks are particularly great trading options as Tuesday’s action kicks off, however. Instead, the stock charts of Twitter (NYSE:TWTR), Wells Fargo (NYSE:WFC) and Marathon Oil (NYSE:MRO) are your best bets. Here’s why and what to look for.
If Twitter seems a little too familiar, there may be a reason. It was one of the stock charts featured back on Sept. 13. Shares had just broken below a key support level, and moreover, that line turned into resistance.
TWTR did end up edging a little lower after that signal, though not alarmingly so. With yesterday’s slight selloff though, Twitter shares are back within striking distance of another key support level.
Click to Enlarge • That line in the sand is $27.69, where TWTR hit a low last week and found a low on Monday as well. The selling paused there, but this may only be a buildup for another wave of selling.
• Even without that support line in place, the downtrend and bearish stairstep pattern has been established.
• It sounds implausible, but if the technical support breaks, there’s not another major technical support area around last August’s low around $15.40.
Wells Fargo (WFC)
With just a quick glance, Wells Fargo shares look like they’re in big trouble. The stock’s down 12% from its August high, and appears to still be going strong.
This is a case, however, where a rebound is apt to be the more likely outcome, presuming the broad banking sector starts to snap out of a relatively unmerited freefall.
Click to Enlarge • The weekly chart is telling. It’s rare for WFC shares to get and remain stochastically overbought for any length of time.
• Simultaneously, the scope of the selloff has pulled Wells Fargo to within easy reach of a key technical support line that’s tagged the prior two major lows. A third encounter with it very well could result in the same bounce.
• Though with a quick glance the speed of the current selloff is alarming, notice that the daily volume is progressively shrinking. The sellers are backing away, or perhaps more accurately, there are very few sellers left.
Marathon Oil (MRO)
Last but not least, Marathon Oil was one of the three stock charts put under the trading microscope back on September 24th. It was noteworthy simply because shares were knocking on the door of a major resistance line that, if hurdled, could spark something of a meltup. That’s exactly how things took shape. MRO broke above that technical ceiling, and have since gained 8%.
Though the initial surge may be about to cool, the heavy lifting has been done. The trick here is finding the right entry spot.
Click to Enlarge • The line in the sand is $22.11, plotted with a red dashed line on both stock charts.
• While the breakout thrust was impressive, Marathon shares look a little overbought in the short run, and may be ripe for a bit of a bearish pushback. That’s ok. The important thing is that the former resistance at $22.11 acts as support on any pullback.
• The weekly chart makes clear that any pullback followed by a rebound may well start the next leg of a rally that has plenty of room to run before another technical ceiling is met again.
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.