At times it wasn’t pretty, but by the time yesterday’s closing bell rang, the S&P 500 was up a respectable 0.97% … extending the recovery effort.
Union Pacific (NYSE:UNP) did a great deal of the heavy lifting, gaining 8.8% after the hiring of Jim Vena as COO prompted several upgrades. Beyond that, though, the market’s most familiar names didn’t lend much of a helping hand. General Electric (NYSE:GE) fell a bit more than 2% as traders started to lock in recently won gains, while stalwart names like Bank of America (NYSE:BAC) skipped out on the day’s rally. The bulk of the S&P 500’s progress was driven by the 90% of its constituents most traders never talk about.
That’s not a bad thing though. Indeed, it’s a good thing, as it means winners and losers are starting to separate themselves.
As Wednesday’s action gets started, it’s the stock charts of Anthem (NYSE:ANTM), ServiceNow (NYSE:NOW) and Hewlett Packard Enterprise (NYSE:HPE) that have laid out relatively clear paths for themselves. They all have just one more milestone to move past.
Losing ground on a day the market makes progress doesn’t inherently mean a stock is in deep trouble, but it certainly doesn’t bolster the bullish case … particularly when the broad market logs a big win like it did yesterday. Bullish hope fades even more, though, when that pullback takes shape the way Tuesday’s setback from Anthem took shape.
The bulls might get one more shot at bringing ANTM stock back from the brink. The odds aren’t looking good though, and one more misstep could spark a chain reaction of selling.
Click to Enlarge• The big red flag here is the way Anthem shares have danced with the 200-day moving average line, plotted in white. The stock fell under it, and then back under it, last month, but the 200-day line acted as a ceiling on Tuesday.
• Underscoring the depth of downward momentum now in place is major and rising bearish volume … well above-average.
• If the December low of $246.57 is breached, and then if yesterday’s low of $241.16 fails to hold the stock up, that just might prompt the last of the would-be profit-takers out of their position.
Hewlett Packard Enterprise (HPE)
Tech giant Hewlett Packard Enterprise looked like it was going to recover with most other stocks after suffering the same setback other stocks suffered last month. But that rebound effort from HPE broke ranks on Tuesday. Worse, the shape of yesterday’s bar says it was a decisive break-away from the broad rising tide.
One or two more bad days could drag HPE back below a key moving average line, rekindling the downtrend that has been in place since September.
Click to Enlarge • Tuesday’s bar is an almost-perfect outside day, where yesterday’s open was above Monday’s close, but Tuesday’s close was below Monday’s open; clearly the two days were pointed in opposite directions. But, the height and relative positions of the two bars suggests a major swing in sentiment.
• Adding to the bearish thesis is the fact that the two highest-volume days since Christmas were both bearish days. The bulls just aren’t coming to the table.
• A cross back under the blue 20-day moving average line may put HPE back into a full-blown downtrend.
Finally, the past several weeks have been volatile ones for ServiceNow, but meaningless ones as well. NOW shares ended yesterday’s action where they were in July.
There’s benefit in the indecision though. In that periods of major movement are followed by periods of no movement — and vice versa — we’re likely to be close to a prolonged period of net movement. What remains to be seen is which direction that move will carry ServiceNow shares.
Click to Enlarge • The ceiling to watch is around $193, where NOW has peaked a few times in recent months. It pushed above that line in August, but the $193 mark means more and could indicate a breakout thrust is underway.
• Conversely, a break under the floor around $159 could lead to a bigger selloff from traders who are already/still nervous after Q4’s big stumble.
• In the meantime, don’t be too quick to react. The trading range here is wide, and ServiceNow shares have been prone to sudden directional shifts due to changing headlines.
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.