What is usually a light, uninteresting day for the stock market turned out to be another eye-popping jaw dropper. That is, on Monday — Christmas Eve’s half-day session — the S&P 500 lost another 2.7%. The seven consecutive losing days have reduced the index’s value by 11.3%. Since its September peak, the S&P 500 is now down 20%.
Microsoft (NASDAQ:MSFT) dished out the most damage, falling 4.2%, though Dell Technologies (NYSE:DVMT) actually booked the bigger loss, falling nearly 22% after shareholders learned the impending reorganization effort would result in a payment of cash and stock versus the all-cash deal most were hoping for.
Still, not every name was dragged lower by the broad market’s loss. Shares of China’s e-commerce outfit Uxin (NASDAQ:UXIN) gained 10.8% on Monday after plunging on Friday in response to a downgrade from Goldman Sachs. Uxin was a rare exception to Monday’s meltdown though.
Headed into Wednesday’s session, stock charts for Advanced Micro Devices (NASDAQ:AMD), Morgan Stanley (NYSE:MS) and Amazon (NASDAQ:AMZN) are worth a closer look, and not of them necessarily for bearish reasons.
Advanced Micro Devices (AMD)
In some regards it’s almost unfair to point out the brewing bearishness from the AMD stock charts. Not only is AMD subject to being pushed around by the market tide, a huge rally seen earlier this year has left behind lots of profit-taking potential. Never even mind the fact that peer and rival Nvidia (NASDAQ:NVDA) is also in a freefall.
Yet, AMD stock still has one support level left in place. Should that support line snap though (and it’s hanging by a thread as it stands), things could get real ugly real fast.
- The line in the sand is $16.17, marked with a yellow dashed line on both stock charts. Notice that the area was also a technical ceiling a handful of times last year.
- In the meantime, Advanced Micro Devices is now back under all of its key moving average lines, and we’re nearing bearish crosses of several of those moving averages.
- If matters do go from bad to worse, the 2017 floor around $9 becomes the next most plausible downside target for AMD stock.
Morgan Stanley (MS)Two weeks ago, MS stock was trapped within a well-framed downtrend, but it was at least finally finding support around a major technical floor around $40.
That floor has bucked and so has the lower edge of the falling trading range. Although it has more to do with the market’s undertow than Morgan Stanley itself, the selloff appears to have taken on a life of its own.
- The bearish trading range is plotted with white dashed lines on both stock charts. That lower boundary ceased to keep MS stock propped up beginning late last week, opening the door to more selling.
- The basis for support at $40 is plenty evident on the weekly chart. That’s where MS stock bottomed in early 2017, setting up a big rally that’s now unwinding.
- It may take a bear market to fully realize this worst-case scenario, but should that take shape, Morgan Stanley’s last major low was around $23, plotted with a yellow dashed line.
Finally, although the tide and backdrop are clearly bearish and Amazon is most likely to be led by that tide, it would be unwise to discount any possibility of a sudden reversal. And, of all the names in good position to lead that turnaround, AMZN stock is actually in one of the best.
On the other hand, Amazon is also one of many stocks that is one bad day away from completely unraveling.
- Part of the key to an Amazon-led recovery is the way Monday’s weakness was limited to just a revisit of a falling support line that has tagged the key lows going back to late October.
- In a bigger-picture sense, Amazon shares were stochastically oversold in the weekly timeframe, which has generally not been a condition the market’s allowed to persist for very long.
- Finally, although the trading lull on Monday would normally make this irrelevant, AMZN stock was one of the few names on Monday to not close at its low for the session. Rather, it formed a doji pattern, which are often seen at pivot points. Confirmation in the form of gains is required from here.
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.