While major U.S. indices closed near flat today, we saw gold prices fall and steep declines in volatility and bonds. It was interesting behavior for these safe-haven and market measurement securities to tumble in such a fashion. Let’s lead off with that in our top stock trades.
Bond ETF
Did you notice the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) take a 2% hit and fall to new 52-week lows in Wednesday’s session? The decline in bond prices signals an increase in yields, which is good for bank stocks. Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM) and others all rose nicely as a result.
It’s not as good for tech, though. So it’s no surprise to see names like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) lower on the day as a result.
The TLT has broken down quite quickly, and if it can’t get back above the $115 mark (and preferably $116), then its three-year lows near $112 are the next line in the sand. Watch how this one shapes up, as it can drive a lot of sectors (and the overall market) when it gets volatile.
Advanced Micro Devices
Shares of Advanced Micro Devices (NASDAQ:AMD) are down about 2% Wednesday, but AMD stock was getting hammered earlier in the session. This name has been under a lot of pressure lately, which is not surprising given its big run. (Is Intel to Blame?) The intraday bounce is probably because seemingly ever trader had their eye on it, but I would have loved for a slightly deeper pullback in the name.
Specifically into this $25 to $26 zone. In there, AMD would have hit its 50-day moving average, some trend support (black line) and a really nice consolidation zone from one of its prior rallies (blue box).
For the short-term, see how AMD trades against Wednesday’s range. In other words, whether it can close above today’s highs or if it stumbles below the lows. Intermediate-term, see how it handles the 20-day.
Lennar
Lennar (NYSE:LEN) stock did not react well to its quarterly results despite a top and bottom line earnings beat.
Breaking below its 200-day week moving average isn’t good, but shares are standing on uptrend support. So far, this has provided a bounce back to $47-ish. Bulls should keep it simple: below this level and look out. Expect resistance near $50.
Is Twitter (NYSE:TWTR) finally starting to wake up? $28 is a clear line in the sand for support, while downtrend resistance (blue line) has been pushing Twitter closer and closer to the mark. A move over this downtrend and it sets up Twitter to test the $29.50 level, which features larger downtrend resistance (black line) and its 20-day moving average. Above both, and Twitter can make a jump into the $30s. Keep on this name, as it stood very strong on Wednesday.
Should Twitter fail, a retest of $28 is likely in the cards. If that mark fails, look for a dip to the April lows in the mid-$26 range. This is also where a longer-term trend line comes into play (not shown on the current chart).
Caterpillar
At one point, Caterpillar (NYSE:CAT) stock wafted up more than 3% on Wednesday. The past two days, in fact, have been rather explosive, with shares rallying from ~$151 to $159 in just a few days. What now?Now we let CAT go. If you missed the move, the risk-reward does not favor chasing here. Maybe Caterpillar will break through this resistance zone (blue box) and challenge its 2018 highs. Perhaps it won’t.
There’s no way we can know with 100% accuracy. That’s why we have to play the odds and sometimes that involves us saying, “you know what, we missed it, let’s move on.” Rather than get frustrated, use CAT as a lesson.
The move to buy was the breakout from its downward channel. It’s now overbought (blue circle) and up big. Let CAT rest and look for the next one.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long GOOGL and JPM.
