With gridlock in Washington largely assured and President Donald Trump still talking optimistically about dealmaking, investors liked what they heard and saw on Wednesday morning. Though the opening bullish gap and subsequent rally will almost certainly prompt some profit-taking pressure, yesterday’s 2.12% advance from the S&P 500 is a clear hint of how traders see stocks right now.
You can thank Amazon (NASDAQ:AMZN) for most of the gain. The e-commerce giant saw its shares rise 6.9% mostly in response to reports that its Alexa-powered Echo devices would be able to speak and listen in Spanish, setting the stage for a launch in Mexico and other Spanish-speaking markets. General Electric (NYSE:GE), conversely, lost 2.1% of its value largely because there are just so many other better stocks to bet on right now.
The market’s raw strength and exaggerated gains from some stocks had made it tough to determine which names are best-suited for trading today; some profit-taking pressure is mounting. But, stock charts of CBS Corporation (NYSE:CBS), Ford (NYSE:F) and American Electric Power (NYSE:AEP) don’t look like they’re vulnerable to that problem … for several different reasons.
CBS Corporation (CBS)
Shares of television and film name CBS have been losing ground for a couple years, with most investors assuming it wasn’t going to be able to compete with bigger, more diversified rivals in an environment that favors streaming players more anyway. With the dust starting to settle though, investors are slowly but surely starting to realize CBS isn’t in trouble at all.
More important though, investors are starting to put their money where their mouth is. Though slowly and subtly, this week’s bullishness has pushed the stock back above a key falling resistance line. From here, bullish gets much easier to muster.
Click to Enlarge• The weekly chart plots the resistance line in question. It’s kept any buying at bay since 2017, but has now failed to do so.
• On the daily chart we can not only see a bullish divergence of all the key moving average lines in late September, we can see a trail of higher lows already in place. That’s something not seen since 2016.
• Though the momentum is encouraging, the volume behind the uptrend thus far hasn’t been all that great. That may change the more progress CBS makes, but it will have to change if this breakout move is built to last.
Ford Motor (F)
The bears have been relentlessly beating Ford down … for years. And, though deeply undervalued relative to earnings, the momentum (psychological or otherwise) may well send it even lower before all is said and done.
For at least a handful of weeks though, F shares look like they’re going to be able to dish out a decent bullish swing. Maybe, just maybe, this bounce is the one that will snap the stock out of the bearish rut.
Click to Enlarge • The weekly chart of Ford puts things in perspective. Ford Motor shares just brushed the lower edge of a falling trading range that’s been guiding it lower since 2014. If history repeats itself, the stock could make its way back to the upper boundary within a few weeks. The stochastic and RSI oscillators also say the stock’s oversold.
• At a trailing P/E of 5.7 and a projected P/E of 7.3, there’s no fundamental argument that says Ford shares aren’t capable of or shouldn’t push their way above the upper resistance line currently at $11.40, though falling fast.
• That being said, though the daily chart appears to be setting up shop above the purple 50-day moving average line, the bullish volume here is clearly fading fast.
American Electric Power (AEP)
Finally, the recent threat to the broad market put a premium on safe havens like utility stocks. American Electric Power hasn’t been an exception to the norm. With the overall market back in a bullish mood/groove, however, it’s not difficult to expect AEP and many of its peers to start fading.
Or, perhaps not. When taking a critical bigger-picture look at American Electric Power, there’s still a solid technical bullish case to be made here.
Click to Enlarge• On the daily chart, the recent rise from AEP has been helped along by encounters with a couple of key support levels made up by moving average lines.
• On the weekly chart this support can be put in perspective. It took shape within the context of a well-framed rally that’s been guided by lines extending all the way back to 2014.
• Assuming the rally won’t come to a full close until the upper edge of the rising trading range is met and/or the RSI line reaches an overbought status, AEP could reach close to $85 before a full headwind is hit.
As of this writing, James Brumley held a long position in Ford and CBS. You can follow him on Twitter, at @jbrumley.