Tuesday ended better than it started, with the S&P 500 advancing 1.07% for the day. The quick recovery erases most of the doubts raised by Monday’s modest stall.
Netflix (NASDAQ:NFLX) did more than its fair share of the heavy lifting, gaining 6.5% after announcing it would be imposing price hikes. Investors chose to see the glass as half-full rather than half-empty, assuming subscribers will pay the new, higher rates rather than choose to cancel their service. Blue Apron Holdings (NYSE:APRN) investors enjoyed the bigger gain, however, as shares soared 45% after the company projected a swing to profit in 2019.
While most stocks were up, there were some notable losers. PG&E (NYSE:PCG) fell another 17.5% as the market continued to digest the ramifications of its bankruptcy filing. The latest chapter in the saga? The company failed to make its most recent payment due on its debt.
Between the December rout, the January bounce and now the advent of earnings season against a backdrop of a government shutdown, finding reliable trading setups is anything but easy. The stock charts of Gap (NYSE:GPS), American International Group (NYSE:AIG) and Walt Disney (NYSE:DIS), however, look like they’re able to follow through on the hints they’ve dropped.
Walt Disney (DIS)
If it had happened in another place under any other circumstances, it might not even be worth noting.
But, where and how Walt Disney shares lost even just a little bit of ground yesterday sets the stage for more downside … as long as the broad market tide doesn’t have other plans. The bears just have one more task to take care of.
Click to Enlarge• Tuesday’s bar is in some ways an outside day, where the high and the low engulf Monday’s range in its entirety. But, it was also an inside day in the sense that yesterday’s open and close were both within Monday’s open/close range. Both point to a change of heart.
• Underscoring the red flag of Tuesday’s action is the fact that the bulls made five consecutive attempts to hurdle the gray 100-day moving average lines, but couldn’t. The pullback unfurled on above-average volume too.
• Though another pullback today would put an exclamation point on the pivot, there’s still a potential technical floor at $109 — where the 20-day and 200-day moving average lines have converged — that could be support.
A little over a week ago, Gap was featured as a stock trapped in a downtrend, unable to break out of the bearish rut even when the market’s tide was bullish.
That has not changed in the meantime. In fact, the factors forcing it lower than have since solidified, pulling the stock lower. Even the floor of the bearish range that’s taken shape since early last year, however, isn’t terribly close (and it’s falling fast).
Click to Enlarge • The ceilings in question are a combination of the purple 50-day moving average line, the blue 20-day moving average line and the straight-line ceiling plotted as a dashed line that has guided GPS shares lower for weeks now.
• Monday’s retest of the 20-day average set up Tuesday’s loss … making GPS one of only a few stocks that couldn’t get traction yesterday.
• The next-best hope is the lower edge of the falling trading range, currently at $23.50 but falling fast.
American International Group (AIG)
Most financial stocks are recovering from a brutal September, and American International Group is no exception to that trend. AIG is now doing something most of the others aren’t, however, which suggests it may fare better from here than its peers will.
Click to Enlarge • Though still below average, the buying volume has not only been bullish, it has been growing. More buyers are coming to the table the higher it goes.
• Last week’s cross of the purple 50-day moving average is also a key buy signal. Though most stocks have done well, AIG has logged eight consecutive days of gains, further suggesting the bulls are on a mission.
• Keep an eye on the $44.60 level, which was a ceiling in November and December, and could become resistance again. Above that level, the next plausible resistance is above $52.
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.