It wasn’t the start to the new year most traders were hoping for. And then it was. And then it wasn’t. And then, by the end of the day, it was again. The S&P 500 finished Wednesday’s trading at 2510.03, up 0.13%.
The modest gain was made without any help from Tesla (NASDAQ:TSLA) or AbbVie (NYSE:ABBV), off 6.8% and 3.2%, respectively. The electric carmaker slumped after falling short of fourth-quarter delivery estimates, calling into question the true depth of demand for the company’s product. AbbVie, meanwhile, hit a headwind after announcing a price increase for its top-selling blockbuster drug Humira. Already under pressure due to impending loss of patent protection, the drug may be on the verge of being immediately less marketable.
Fortunately, there were more than enough stocks like General Electric (NYSE:GE) and Ford Motor (NYSE:F) — neither of which was a stellar performer in 2018 — to keep stocks in the black for the day. GE rallied 6.2% as hope for a turnaround continues to gel, while Ford gained 3.3% largely for the same reason.
Though the first trading day of the new year unfurled without much drama, it’s still too soon to take anything for granted. For example, who would have expected that Bristol Meyers (NYSE:BMY) would buy out Celgene (NASDAQ:CELG)for $74 billion?
Though it has been a miserable past few months for Facebook and its shareholders as the impact of several misguided decisions finally come back to haunt the company, the sellers arguably overshot.
But over the course of the past few weeks, FB stock has quietly hinted that it’s ready to correct that excessive selloff. Better yet, the lines in the sand have become crystal clear.
Click to Enlarge • Though it peeled back to lower lows rather than clearing it, last month’s test of the purple 50-day moving average line was an encouraging effort. As of yesterday, Facebook was once again testing the blue 20-day moving average line as a ceiling.
• As the stock is once again testing key moving average lines, the most recent “up” days have been on higher volume, while the “down” days have been on lower volume.
• The weekly chart also illustrates that Facebook has been guided lower by falling support and resistance lines, but the upper boundary is being testing in earnest. One more decent nudge could start a chain reaction of buying.
eBay is in most regards in the same situation as Facebook. That is, it suffered a pretty rough past few months, but within the past few weeks it’s toyed with a reversal of that weakness. In fact, EBAY stock has already cleared some of the key technical hurdles that Facebook hasn’t, and is already in a technical uptrend.
Click to Enlarge • The two key lines in the sand are the blue 20-day moving average line and the purple 50-day moving average line. Thanks to Wednesday’s 2.8% gain hurdled them both, the latter of which had held the stock back since July.
• The “turn” has already been made in the weekly timeframe. There we have a bullish MACD cross, and we’ve already seen the RSI indicator wiggle its way out of an oversold condition.
• That same weekly chart shows us one last hurdle to clear … the technical ceiling that has tagged all the major highs going back to early last year. A little more progress should do it.
Finally, though Medtronic teased investors with a hint of a rebound last week, that effort faded on Wednesday.
That’s not the most alarming part about the chart, however. That stumble dragged MDT back under a key long-term moving average line that portends more downside. The more subtle clues raise even more red flags.
Click to Enlarge • The pivotal line in question is the 200-day moving average line, plotted in white on both stock charts. Yesterday’s 4.3% setback pulled the stock back under for a second time in two weeks.
• Simultaneously, all the other key moving average lines have made bearish crosses, or are about too.
• Arguably worst of all, the selling volume has been in place for a while, and isn’t abating. The red volume bars on the daily chart are clearly higher, but more telling is that the weekly chart’s Chaikin line fell below the zero level late last month, and has actually been dwindling since September.
As of this writing, James Brumley held a long position in Ford and Medtronic. You can follow him on Twitter, at @jbrumley.