It could have been worse. In fact, for the better part of Wednesday, it was worse than the 0.05% loss the S&P 500 logged. The bulls made a point of pushing back.
General Electric (NYSE:GE) did much of the work of getting the market back to what was effectively a breakeven. Shares of the beleaguered industrial giant were up more than 2% when investors’ faith in the turnaround effort was restored … again. Smaller Chesapeake Energy (NYSE:CHK) logged the much bigger gain though, closing 9.8% higher after an unexpectedly strong fourth-quarter print.
The broad market might have even ended yesterday in the black, were it not for WW (NASDAQ:WTW)… the company formerly known as Weight Watchers International. Though not an S&P 500 components, its 35% post-earnings plunge set a tone for many other names.
None are solid trading prospects headed into Thursday’s trading. Rather, it’s the stock charts of Bank of America (NYSE:BAC), Gap (NYSE:GPS) and UnitedHealth Group (NYSE:UNH) that were of the most interest. Here’s why.
Bank of America (BAC)
Two months ago, Bank of America shares looked untouchable. Granted, most stocks did, as the December drubbing was mostly indiscriminate. Still, to see a blue chip in so much trouble at the time was … troubling.
Much has changed in the meantime. Indeed, everything has changed. And, while it has been easy to be suspicious of the rebound rally thus far — fearing it would come unraveled — the effort moved within reach of securing itself in place this week in a couple of different ways.
Click to Enlarge • One of those ways is a move above the 200-day moving average line, plotted in white on both stock charts. The long-term line actually served as support on Friday.
• The other way is a cross back above a previous ceiling around $29.20, plotted with a blue dashed line on the daily chart, and a hint of a move above the falling resistance line that has tagged all the major highs on the weekly chart going back to the beginning of 2018.
• The final line in the sand its $29.75, where BAC peaked last month.
Owning shares of clothing retailer Gap hasn’t been easy at any point since the beginning of 2018. And, there’s still plenty of work to be done if it’s ever going to recover well enough to step into.
But with the backdrop of what’s taken shape since late last year paired with the stock’s action from yesterday, GPS has become a name to at least put on your radar. A few more good days after months’ worth of compression could release the coiled spring and catapult Gap stock considerably higher for a change.
Click to Enlarge • The backdrop in question is the horizontal support line that has developed around $24.40, plotted with a yellow dashed line. The bulls are sending a message.
• As of Wednesday, GPS shares have broken above a resistance line that’s been bearing down on Gap stocks since June’s peak. The stock’s also testing the waters of a break above the 50-day moving average, plotted in purple.
• Also note the volume surge behind yesterday’s gain. It wasn’t just Gap drawing fresh buyers either. The entire retail sector popped. If it’s a sector-wide reversal, it could get real traction.
UnitedHealth Group (UNH)
Finally, on Tuesday of this week we cautioned that UnitedHealth Group was suspect in the way it was logging lower lows after its 50-day moving average line fell under the 200-day average … a “death cross.” Those fears came to fruition on Wednesday, when shares broke back below both moving average lines. With the ball now rolling in earnest — with a little momentum — there’s good reason to be concerned.
Click to Enlarge • Yes, UNH stock broke below the purple 50-day line and the white 200-day moving average line in December, only to climb back above both the next month. This time, though, it has happened in the shadow of the first death cross in years.
• Zooming out to the weekly chart of UNH puts things in perspective. Traders, accustomed to uninterrupted progress, have been handed a scenario they likely weren’t psychologically prepared for.
• The bulls may push back again, but odds are good the convergence of all three key moving average lines plotted on the chart will serve as a ceiling and send UnitedHealth Group shares to even lower lows. Watch carefully for that action.
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.