Wednesday was another winner for Wall Street, but just barely. The S&P 500 ended the day up 0.22%, having peeled back from a high of 2,625.786 to close at 2,616.10. The weight of the rally since late December is starting to weigh on investors.
Yet, had it not been for sweeping bullishness from the financial sector, the overall market may not have ended the day with any gain at all. Ford Motor Company (NYSE:F) fell more than 6% on a disappointing fourth quarter. Snap (NYSE:SNAP) fared even worse, however, losing 13.7% after losing CFO Tim Stone … the second CFO resignation in less than a year.
Those disparate results are a microcosm of the environment right now, where the rising tide isn’t lifting all boats equally. Going forward, traders will have to be more discriminate, and focus on stock charts like those of Fiserv (NASDAQ:FISV), Pfizer (NYSE:PFE) and PNC Financial Services Group (NYSE:PNC), which are better positioned to make trade-worthy moves.
As odd as it may sound to cast a bullish light on Fiserv after it fell more than 4% at one point on Wednesday in response to news that it aims to acquire rival First Data (NYSE:FDC), in most regards the stumble was the capitulation the stock’s needed for a while.
Indeed, several clues already suggest that’s exactly what happened yesterday.
Click to Enlarge • The shape of yesterday’s bar is telling in and of itself. After a poor open and then a sharp move to lower lows, the buyers came roaring back later in the day to force a close near the top of the range. The pivot has already been made.
• Underscoring the potential capitulation is a huge volume surge. This indicates the last of the would-be sellers were finally flushed out. Now the buyers can start to trickle in without facing a headwind.
• Curiously, yesterday’s low around $68.50 was also last month’s low, and last May’s low. The bulls have drawn a line in the sand there.
• Still, this is a scenario that requires a little follow-through to erase any lingering doubts that the reversal effort is for real.
In yesterday’s examination of the market’s top three stock charts, the brewing bearishness of Merck (NYSE:MRK) was highlighted, but only because rivals like were also bumping into a headwind. When an entire group of stocks starts to struggle, it generally indicates a secular undertow that won’t be easy to stop.
In the meantime, Pfizer itself worked its way into a little more technical trouble, losing ground after being unable to press above its key moving averages too … moving averages that have formed bearish crosses while most other stocks are seeing bullish ones.
Click to Enlarge • A couple of weeks ago the blue 20-day moving average line fell below the purple 50-day and gray 100-day moving average lines, and the 50-day line is close to breaking below the 100-day line. It all points to accelerating bearishness.
• The selling volume has also been greater than the buying volume of late, even if both have been choppy.
• The white 200-day moving average line at $40.27 has the potential to act as support should the potential selloff take shape, but there’s an interim floor around $42.00 that would have to fail first before any of this weakness matters.
PNC Financial Services Group (PNC)
Finally, though almost all financial stocks were up on Wednesday, too many of them are now too overextended to bother stepping into now.
Not PNC Financial Services Group, however. PNC is still closer to its recent low than not, with a whole lot of room to keep climbing. And, the recent chart action says this stock has built a near-perfect launch pad from which PNC will continue to rally.
Click to Enlarge • Notice that PNC Financial Services shares have mostly stagnated since late last year, but within the past few days has started to log higher highs and higher closes.
• Better yet, Wednesday’s pullback to the blue 20-day moving average line was a perfect opportunity for the profit-takers to pile in. They didn’t though, overwhelmed by the buyers waiting in the wings. Rising volume confirms more buyers are crawling out of the woodwork.
• Zooming out to the weekly chart we can see the December pullback dragged PNC all the way to an established support line that extends back to March’s lows. Each brush of that floor has resulted in a decent rebound.
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.