The bulls tried their best, but when push came to shove, they just didn’t have enough fight. Spurred by just a few too many lackluster earnings reports, the S&P 500 ended yesterday’s action down to the tune of 0.27%.
The Coca-Cola Co (NYSE:KO) was one of those names with an alarming quarterly report. KO stock fell more than 8% on the heels of expected Q4 sales and profits, but a 2019 profit outlook that was considerably less than estimated. Centurylink (NYSE:CTL) ended the day even deeper in the red, though, sliding 13% after cutting its divided in half.
There were a handful of winners, like Encana (NYSE:ECA), which advanced 2.2% in step with rising oil prices, and was up another percentage point in after-hours trading. In fact, there was more bullish volume than bearish volume on Thursday. There just wasn’t enough buying interest in the right stocks to lift the market over the hump.
Fastenal Company (FAST)
Back in October, Fastenal Company shares were in something of a freefall, After bumping into a long-standing resistance line in August, all signs pointed to a trip back to the lower edge of the trading range that has framed the volatile rally going back to 2016.
That never happened … at least not in full. Rather than making a complete pullback, FAST stock hit a low about halfway there, and then made a triple bottom and established a new support line in December.
Now we’re back at the long-term ceiling, and hinting at another bearish outcome. The question is, which floor is the one that will do the job?
Click to Enlarge • The trading range is framed by white dashed lines on both stock charts. We bumped into the upper one this week.
• The newly developed intermediate-term floor is marked with a yellow dashed line, also on both stock charts.
• The weekly chart’s stochastic indicator is in overbought territory, which has also coincided with pullbacks; that’s not a condition that lasts long.
With nothing more than a quick glance, the 0.3% gain Davita dished out yesterday is little to cheer. Indeed, DVA has been suspiciously left out of the most of the post-December rally.
A closer, second look at Thursday’s action, though, sets the stage for renewed bullishness in light of the other clues that have materialized over the course of the past couple of weeks.
Click to Enlarge • While Thursday’s gain was ho-hum, the intraday turnaround was telling. The bears had a chance to tip it over with the early move back under key short-term moving average lines, but the bulls weren’t going to give up any ground.
• And those bulls are certainly strong in number. Even beyond yesterday’s volume surge behind the advance, the accumulation (buying) days have seen higher and higher volume.
• There may be some brewing resistance around the $58.10 area, which is marked with a dashed blue line on both stock charts.
Finally, it’s not said often enough, but there’s a lot of value in spotting a surge in volatility from a particular stock, or index. When the war between the buyers and sellers heats up, it often signals a turning point.
BorgWarner shares have been particularly volatile the past few days, in all the right places. It looked like the bears were going to take control last week, but the bulls made a strong statement yesterday. They also failed to move above the one key ceiling they really needed to clear, however, so the outcome of this skirmish hangs on the balance.
Either way, some something big is likely to come from the melee.
Click to Enlarge • The big line in the sand is $41.50, plotted with a yellow dashed line on both stock charts. That’s where BorgWarner has peaked several times since October, and it was still trouble as of yesterday.
• Also noteworthy, however, is how the purple 50-day moving average line has stepped up as a technical floor.
• Even before yesterday’s big gain, the bullish volume was brewing, suggesting the undertow is bullish. The stumble from last week, though on above-average volume, didn’t take shape with a lot of bears’ support.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.