The market may have ended last week on a bullish foot, but it sure didn’t start this week out in the same mood. The S&P 500 ended Monday’s action at 2690.73, down 1.66%.
Nvidia (NASDAQ:NVDA) did most of the damage, falling 12% thanks to a combination of imploding cryptocurrencies and uncertainty as to the merits of the gains Advanced Micro Devices (NASDAQ:AMD) dished out earlier this year following its third-quarter report. AMD stock was down as well for the same reasons though, off to the tune of 7.5%.
There were winners. A beleaguered Ford Motor (NYSE:F) mustered a 2.2% gain primarily on news that it was forging ahead with autonomous vehicles. Investors were just happy to find a sliver of encouraging news on Wall Street on Monday. There just wasn’t enough of it.
The sheer scope of yesterday’s tumble, however, makes today’s action questionable. The pullback was so steep that once again, the door has been opened to a bounce that could turn into more. To that end, the stock charts of Intuit (NASDAQ:INTU), Micron Technology (NASDAQ:MU) and PulteGroup (NYSE:PHM) are of interest this morning mostly because they’re all working their way into conditions that supersede the market’s ultra-short-term odds.
Micron Technology (MU)
It’s probably being driven more by the broad selloff from the tech sector than by Micron Technology in particular. But, the underlying reason isn’t entirely relevant. What matters is what’s happening, and what that may mean ahead.
And what’s happening with MU is, it’s trapped in a well-defined downtrend that suggests lower lows lie ahead.
Click to Enlarge • The downtrend in question is plotted with red dashed lines on the daily chart. Micro just kissed the upper edge of that zone, and rolled over and is on track to reach the lower edge again.
• On the weekly chart as well as the daily chart it’s clear the break below the rising support line, plotted as a white dashed line, was the tipping point.
• The next most likely landing point for this pullback is the 61.8% Fibonacci retracement level of $30.56.
During Monday’s regular-hours session, Intuit shares fell 5.8% before the post-close release of the company’s third quarter earnings. Part of that weakness was the exit of a risky trade in front of risky news, while the bigger part of it was simply market related. Either way, INTU was pushed to the brink of a major meltdown.
The good earnings news sparked a sizeable rebound in after-hours trading that appears to have carried through to today, abating the risk at hand. But, the potential for a major breakdown is still there.
Click to Enlarge • The line in the sand is $196.11, where Intuit hit a low on Monday as well as a low last month. Lending a helping hand as a technical floor is the 200-day moving average line at $198.90, which didn’t let INTU close below that level.
• Though Intuit shares have backed away from danger for the time being, as overbought as it has become since last year, traders will want to keep an eye on the floor around $196 for a few more days.
• If that floor snaps as support, the 38.2% Fibonacci retracement line at $173.48 becomes the next most likely landing point.
Just because a stock manages to move higher on a bearish day doesn’t inherently make it a name worth buying, but it sure doesn’t hurt the bullish argument. And, just because a stock dishes out a gain against a backdrop of discouraging industry news doesn’t add to the bullish thesis, but it certainly doesn’t’ detract from it either.
Both apply to PulteGroup shares as Tuesday’s trading gets going. It was up 1% against the bearish tide on Monday, and it made the gain despite the new two-year low reading in homebuilder confidence. We may have already seen the capitulation.
Click to Enlarge• The bears had ample opportunity to push Pulte shares lower. They just couldn’t. Instead, PHM stock was able to crawl back above its 20-day and 50-day moving average lines.
• Also note that the buying volume continues to grow on the way up.
• The weekly chart puts it all in perspective. Though demand for new homes truly is fading, investors over-punished PulteGroup for it. Now the pendulum is swinging the other way. Clearing the hurdle at $25.40 will be the key.
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.