The bulls finally found their get-up-and-go on Friday of last week. And, though it wasn’t enough to pull the shortened trading week out of the red, Friday’s 0.85% advance from the S&P 500 pointed the market in the right direction to get this week going. Now the trick is pushing through all the political drama.
General Electric (NYSE:GE) did much of the heavy lifting, gaining 4.3% after tweaking its deal to sell its locomotive arm to Westinghouse Air Brake Technologies (NYSE:WAB) — known better as Wabtec — in a way that will net it $3.4 billion more than previously expected. Apple (NASDAQ:AAPL) wasn’t far behind with its 3.3% advance though, plugging into broad technology rally.
Friday’s gains materialized despite Intel (NASDAQ:INTC). Shares of the computer-tech titan fell 5.5% in response to a disappointing quarterly report that suggested cloud and data center growth was slowing down.
Headed into the new trading week, however, it’s stock charts of Incyte (NASDAQ:INCY), Pfizer (NYSE:PFE) and MGM Resorts International (NYSE:MGM) that are of the most interest. All of them may be familiar, as each is now making good on the promise each exhibited in prior looks. In two of the cases, once again, a budding trend is being assisted by virtue of peers’ stocks behaving similarly.
The last time we looked at Incyte back on Jan. 4, it was knocking on the door of a break above a key horizontal resistance level, and the 200-day moving average line. It wasn’t over either yet, but close on both counts.
That happened in the meantime, but another technical ceiling came into play just a couple days later. Until that line was cleanly hurdled, there was still too much risk to dive in. A hurdle of that ceiling has also been made, and now confirmed, making INCY a very compelling rally candidate.
Click to Enlarge • The resistance that came into play shortly after our last look is $74.66, plotted in red on both stock charts. That’s where INCY topped out a couple of times last year, but it’s no longer a cap.
• In fact, that ceiling served as a floor on Wednesday of last week. Ceilings that turn into floors often have more meaning.
• Also within the past few days we’ve seen bullish crosses of all moving averages, including the so-called ‘golden cross’ where the purple 50-day moving average lines moves above the white 200-day moving average.
More than once this month we’ve pointed out how stocks from the same sector and industry are moving in a herd. It’s an important nuance, simply because those trends tend to last longer.
Drug companies Merck (NYSE:MRK) and Pfizer have been of particular interest lately, as their two stock charts were toying with major technical trouble at almost the exact same time. In fact, we took a close look at Merck on Friday after it moved dangerously close to a key floor. Merck’s and Pfizer’s joint action on Friday have put Pfizer back in focus today as another pharma name that’s playing with fire.
Click to Enlarge • On Friday, PFE tested a recently-developed floor around $40.50, plotted with a dashed blue line. That’s not only last week’s low, but it’s the December low and where the 200-day moving average line now rests.
• Underscoring the bearish undertow is the number of sellers that crawled out of the woodwork last week. The bearish volume was growing the whole time too.
• Zooming out to the weekly chart we can gain some perspective in this unexpected weakness. From this vantage point we can see things were unusually bullish in late-2018, setting up a potential return to a support line that tagged the major lows in 2017.
MGM Resorts International (MGM)
Finally, back on Jan. 11 MGM Resorts was presented as a budding (albeit flawed) breakout opportunity. The key would be getting past its 200-day moving average line, but it looked to be in need of a regrouping effort before the bulls took their shot.
The bulls ended up taking that break, not pushing above the 200-day line at the time. Now, well-rested, the buyers are testing the waters of that breakout thrust again.
Click to Enlarge • On Thursday and Friday of last week, after a brief and small dip, MGM brushed the white 200-day moving average currently at $28.80. They didn’t move above it, but they didn’t back away from it either.
• Although still uneven, we can see above-average buying volume here.
• Bolstering this brewing bullishness is a similar move from rival casino name Wynn Resorts (NASDAQ:WYNN), which recently broke above its own technical resistance.
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.