Another winning day for the market means all of the losses seen during the early part of Thanksgiving week have been wiped away. The 2.3% gain the S&P 500 drove yesterday admittedly leaves it vulnerable to some profit-taking, but if nothing else a message has been sent to the doubters.
Amazon.com (NASDAQ:AMZN) led the charge, gaining 6.1% on Wednesday on the heels of multiple announcements. One of them was news that the tech giant is now offering on-site servers. The other biggie was news that the company was developing its own machine-learning chip that takes aim at Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC).
There weren’t many of them, but most noteworthy among the losers yesterday was the 11.8% tumble from Tiffany & Co. (NYSE:TIF). The luxury brand fell short of last quarter’s same-store sales growth estimates.
Yesterday’s volatility is often the kind that makes it tough to get a good read on stock charts, but Ralph Lauren (NYSE:RL), Microchip Technology (NASDAQ:MCHP) and Masco (NYSE:MAS) have set up fairly reliable futures regardless of what the rest of the market does.
Microchip Technology (MCHP)
After a rather torturous Q2 and Q3, Microchip Technology shares have mustered the respectable beginnings of a recovery. As of a couple of weeks ago though, the effort has hit a wall.
Nevertheless, the odds of a rekindled recovery effort and the potential gain — should that take shape — are too compelling to pass up. That’s especially true after Wednesday’s trading.
Click to Enlarge • Since early November, MCHP stock has been trapped between a rising support line and a horizontal resistance level. Both are marked with a white dashed line.
• Though range-bound, as of yesterday the blue 20-day moving average line is above the purple 50-day line, and Wednesday’s bullishness unfurled on huge volume that so far had been missing.
• If the ceiling at $76.08 can be cleared, the next most likely technical ceiling is around $86.50, where you’ll find the 200-day moving average. The ultimate goal here, however, may be to fill August’s bearish gap. That would bring MCHP to at least $96.58.
Ralph Lauren (RL)
Just because a stock loses ground on a day when the broad market gains doesn’t inherently make that name a sell. On the other hand, when a stock fails to make forward progress on a day like Wednesday’s or Tuesday’s trading, something is decidedly wrong.
That’s Ralph Lauren shares, which have not only broken below the last-ditch technical support level identified back on Nov. 12, but just squandered their best shot at a turnaround. The bearish clues, meanwhile, continue to pile up.
Click to Enlarge • The last-ditch support line in question was the 200-day moving average line, plotted in white. As of the 12th it was under attack, and failed to hold it up. RL hasn’t closed above that line since then.
• In the meantime, we’ve seen the blue 20-day moving average line move below the 200-day average, confirming the short-term momentum has turned bearish. Note the other moving average lines are also sloped downward.
• Though we saw a hint of bullishness late last week and early this week, also notice how much bearish volume we saw before and after that brief bounce effort.
Finally, though Masco shares were hit hard in September and October, a healthy rebound effort is underway. Not only was last month’s reversal decisive, MAS shares have found support at a place where it was needed the most.
Wednesday’s bar, in the meantime, puts an exclamation point on the turnaround move.
Click to Enlarge • The new support line is the 20-day moving average line, plotted in blue. Once MAS got above it on Nov. 2, it has been almost a near-perfect floor while letting the bulls gear up for another leg higher.
• Zooming into the daily chart of Masco, we can see the bears tried to drag the stock below the support being offered by the 20-day moving average line. With a little help from Jerome Powell, the bulls sent a clear message that it just wasn’t going to happen. The buyers have fully tipped their hand.
• Zooming back out to the weekly chart, we can see the two-bar reversal from late October and early November. The two tall highlighted bars are mirror images of one another, forming opposing marubozu patterns that suggest the last of the sellers were flushed out and the first of the patient buyers began pouring in.
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.