Not a bad start for stocks this week. Though they slumped into the red early in the session yesterday, Monday’s close of 2724.87 for the S&P 500 was 0.68% better than Friday’s last trade. That was the best close since November.
Roku (NASDAQ:ROKU) led the charge, gaining 4.9% yesterday, following through on a rebound effort that first took shape at the beginning of the year. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) helped set the bullish pace as well, gaining 2% headed into its post-close earnings report. Sales and earnings were better than expected, but steep spending increases sent share down more than 2% in yesterday’s after-hours action.
Despite the broad market’s ongoing gains, winners and losers continue to diverge, leaving some names at pivot points while traders figure out what to do with them. The good news is, the lines in the sand for the stock charts of Verizon Communications (NYSE:VZ), Broadcom (NASDAQ:AVGO) and Kinder Morgan (NYSE:KMI) are pretty clear.
Verizon Communications (VZ)
Back in late December, Verizon Communications had peeled back to a pivotal level. Though the bulls had finally started to push back against a pretty devastating pullback, the matter was far from settled at the time.
Incredibly enough, it’s still not. Although it looked as of the bulls were taking charge after that rebound, we can look back now and say maybe they didn’t. VZ stock is once again toying with the very same support levels that came into play over a month ago.
Click to Enlarge • One of those technical floors is the 200-day moving average line, plotted in white on both stock charts. Verizon shares fell under that line last week, but quickly recovered. The bears are going to test that floor again though.
• The make-or-break line, however, is the $52.30 mark. That’s more or less the absolute low VZ has made since December, marked with a yellow dashed line. A move below that level will likely start a selloff that can’t be easily stopped.
• Should that selloff take shape, the rising floor just above the $50 is the most plausible technical target. The weekly chart’s stochastic indicator should also fall into oversold territory at a major low.
With our last look at Broadcom back on Jan. 25, we acknowledged the break above a long-standing resistance line was a great first step, but more work needed to be done. Namely, AVGO shares needed to survive a real test and remain above that line in the sand.
That’s happened in the meantime. Broadcom have continued to forge ahead, shrugging off profit-taking to make good on the breakout thrust. Another line in the sand has come into play as of last week though.
Click to Enlarge • The converging trading range is plotted on both stock charts with white dashed lines. AVGO broke above the upper boundary four weeks ago, and has continued to move higher.
• Last week’s high of around $274 isn’t anything to dismiss as inconsequential. That’s where AVGO has peaked a few times since early 2018; follow the yellow dashed line back in time on both stock charts.
• Although potential resistance has to be cleared at $274, if that happens there’s a great deal of upside to tap into. There’s more than a year’s worth of pent-up buying that’s yet to be fully unleashed.
Kinder Morgan (KMI)
With nothing more than a quick glance at the recent chart of Kinder Morgan shares, it would be easy to jump to a bullish conclusion. The stock’s up 25% from its December low, and seeming still going strong.
Take a step back and look at the bigger picture though. While the rally is compelling, this is when, where and how it should be running into major technical trouble.
Click to Enlarge • Monday’s high around $18.40 should be uncomfortably familiar to long-term investors. That’s where KMI struggled for months in the middle of last year, never able to clear it cleanly.
• Though the recent rally has been impressive, in the weekly timeframe KMI shares are overbought, according to the stochastic indicator. History says Kinder Morgan shares tend to peel back once they become stochastically overbought.
• Although the current move seems like it has got lots of momentum, look closely at the daily chart’s volume data. The buyers have been backing off for a couple of weeks now. There’s not actually a lot of investor support for KMI at its current price.
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.