It was touch-and-go for the better part of Thursday’s action, but the bulls managed to pull out another win. It was only a small gain of 0.14% for the S&P 500, but each day that doesn’t result in a drubbing is another day’s worth of improved confidence from investors.
Intel (NASDAQ:INTC) set the marketwide tone, and the pace for the tech sector, up 3.8% in front of its Q4 report posted after the close. Shares were deeper in the red in after-hours action, however, after first-quarter revenue projections disappointed. Xilinx (NASDAQ:XLNX) was the day’s big winner though, gaining 18.4% on an impressive third-quarter print. Between the two, investors were willing to wade into most tech stocks in a big way.
Not every name was a winner yesterday, however. Freeport-McMoRan (NYSE:FCX) tanked to the tune of 13.1% in response to declining revenue, and production, in its recently ended fourth quarter.
The market’s better names continue to separate themselves from the lesser ones, but Thursday’s action suggests another trend is developing. That is, stocks from the same sector or industry are starting to move in a herd, which generally points to longer-lived trends. Stock charts of Advanced Micro Devices (NASDAQ:AMD), Merck & Co. (NYSE:MRK) and Broadcom (NASDAQ:AVGO) are particularly noteworthy beneficiaries of this new nuance.
A week and a half ago, Broadcom was featured as a breakout candidate. After months of being squeezed into a narrowing range, the stock was finally being forced out … ready to make up for lost time.
That didn’t happen straight away, but with the help of a sector-wide tech rally on Thursday, AVGO is up and over a big hump and free to keep moving higher.
Click to Enlarge • The shrinking trading range is plotted with white dashed lines on both stock charts. Broadcom was shoved above the upper boundary on Thursday.
• It’s relatively easy to overlook, but we’re now in the shadow of all bullish moving average crossovers.
• Though it’s unlikely to make a straight-line move there, the next most likely target is last year’s peaks around $273, plotted with a red dashed line. That’s only a checkpoint target though, and not necessarily an end to the rally.
Merck & Co. (MRK)
A couple of different times this month we’ve looked Merck & Co. as well as Pfizer (NYSE:PFE), though for the same reason. That is, both had a stellar 2018, but both have been toying with a breakdown. Each was waving its own separate red flag.
They both still are, too. But, while Pfizer is working its way to a breaking point, Merck moved even closer to a breakdown on Thursday. One more misstep could push it over the edge.
Click to Enlarge • That “edge” is the rising support line, dashed, that extends back to April’s lows.
• While a floor still remains, another one has been broken. The 100-day moving average line, gray, had been a support line since October, but MRK closed below that line yesterday.
• Underscoring the brewing selling interest is the massive spike in bearish volume seen on Thursday.
Advanced Micro Devices (AMD)
Finally, late last year Advanced Micro Devices shares were toying with a break under a key support level around $16. It never happened. Instead, AMD recovered quite nicely, even if not overwhelmingly. The stock pushed back above all of its key moving average lines early this month, and has been stagnant ever since.
That sideways action sets the stage for a potential breakout thrust though, if shares can get decent traction for just one more day.
Click to Enlarge • The ceiling in question is around $21, plotted with a red dashed line on the daily chart.
• Notice how well traders have kept Advanced Micro Devices at or above the 20-day, 50-day and 200-day moving average lines. The support found at these levels serves as a floor, or launch pad, for a breakout move, and a bullish MACD cross on the weekly chart would be the ideal trigger.
• The fact that the stock of rival Nvidia (NASDAQ:NVDA) is not only getting similar but better traction underscores the bullish case for AMD.
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.