The bears tried to drive the market to a second consecutive losing day on Wednesday, but when push came to shove as the closing bell approached, the bulls stepped up. The S&P 500’s close of 2,638.70 yesterday was a 0.22% improvement on Tuesday’s last trade, and left stocks at least a little better positioned to resume the recovery effort that got going in late December.
International Business Machines (NYSE:IBM), amazingly, led the way with an 8.5% advance after posting better-than-expected fourth quarter results. Waters Corporation (NYSE:WAT), however, technically saw the bigger gain, rallying 13.1% in response to its impressive Q4 report.
News-driven stocks are tough, if not impossible, to trade though, as their stock charts are always one headline away from the complete reversal of a well-developed trend. Traders seeking better prospects may want to instead look at the stock charts of Applied Materials (NASDAQ:AMAT), Fortinet (NASDAQ:FTNT) and Dentsply Sirona (NASDAQ:XRAY). Here’s why.
Applied Materials (AMAT)
Way back on Nov. 21, Applied Materials was featured as a potential rebound candidate. A couple of days of big gains on even bigger volume hinted there were some potential buyers waiting in the wings that would undo the damage done over the course of 2018.
The breakout thrust never really took shape. A falling resistance line going all the way back to March’s peak got in the way. It’s still standing, but as of this week it’s under attack again. In the meantime, another key line has come into play.
Click to Enlarge • The bigger-picture resistance line is plotted as a dashed line on the weekly chart. Last week’s gain bumped into it, and though down in the meantime, AMAT is still within striking distance.
• In the meantime, the buyers have started to test the gray 100-day moving average line as technical resistance. If it’s cleared, it could be catalytic.
• Though the potential recovery is huge, suspiciously missing from the mix thus far is decent buying volume. Applied Materials may need to clear its hurdles first before those buyers emerge.
Fortinet shares have made no net progress, up or down, since early November. Rather, they’ve just bounced around within a narrowing range.
That could be about to change, however, with an explosive move, that unleashes all the increasingly pent-up action that has been kept in check be narrowing boundaries. The matter will come to a head as of today.
Click to Enlarge • On Thursday, the purple 50-day moving average line will cross below the white 200-day line, forming a so-called ‘death cross’ that portends more bearishness. Though we don’t see the usual bearishness one would expect to accompany a death cross, the event itself may well inspire a refreshed selling effort.
• Even if the death cross spurs selling, Fortinet won’t be beyond salvaging until and unless it crosses below the recent lows near $64.50. That floor is plotted on the daily chart as a yellow dashed line.
• Still, don’t rule out a bullish move from this consolidation. The weekly chart shows a modicum of bullish interest. The key for the bulls will be clearing the $76.70 area, where FTNT peaked in December and where the gray 100-day moving average line will soon be.
Dentsply Sirona (XRAY)
Finally, on the first trading day of this year, the budding rally from Dentsply Sirona was dissected as a major breakout candidate. It has not disappointed, rallying from $37.21 then to the current price of $41.02, pushing above a relatively important resistance level in the meantime.
As of yesterday, though, the next likely hurdle has come into play. Clearing it will be tough, but could be catalytic.
Click to Enlarge • That “next likely” hurdle is the 200-day moving average line, plotted in white on both stock charts. The bulls weren’t afraid to approach it, but clearly they’ve yet to push past it.
• If the 200-day average is hurdled, the next checkpoint target is around $47.50, marked with a red line. That’s the upper end of the gap that was left behind with August’s plunge.
• Though there’s room for a little pushback here, don’t dismiss the momentum seen since last month as insignificant. The 20-, 50- and 100-day moving average lines have all made bullish crosses for the first time since late-2017.
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.