It may not be the way most investors wanted the threat of another government shutdown to end — with the declaration of a national emergency intended to accelerate the construction of “the wall” — but Wall Street loves certainty. The S&P 500 gained 1.1% on Friday to log the best close in three months.
Making the day’s gains even more impressive is the scope of the advance despite some major setbacks. Mattel (NASDAQ:MAT) was off more than 18% on a lackluster outlook for the coming year. Newell Brands (NASDAQ:NWL) fell more than 20% for the same reason.
Yet, of the stock charts we’re most interested in, more of them have bullish potential than bearish. Those charts are Visa (NYSE:V), D. R. Horton (NYSE:DHI) and Amazon.com (NASDAQ:AMZN). Here’s what to note.
D. R. Horton (DHI)
D. R. Horton is knocking on that door as of last week’s close. One more good day could get it over the hump.
Click to Enlarge • That hump is the 200-day moving average line, plotted in white on both stock charts. DHI pushed above that level earlier in the week only to fall back below it, but the bulls were quick to put it back in the hunt.
• Zooming out to the weekly chart we see multiple buy signals, including a bullish MACD cross and a Chaikin line that’s back above zero.
• If the brewing breakout effort can take hold, the most plausible upside target is around $46.40, where D. R. Horton was capped for the better part of last year.
A couple of bad days for a stock isn’t necessarily the end of the world. It happens. But, when a high-profile market darling is not only skipping out in a month-long marketwide rally because it’s bumping into familiar technical resistance, that’s a red flag.
That’s Amazon.com right now. It got January started with a bang, but has been suspiciously weak of late. As of Friday, it’s resting on a last-ditch perch that’s preventing the sellers from pulling the rug out from underneath it.
Click to Enlarge • The precision with which the rally was stopped is the key concern. All it took as a brush of the white 200-day moving average line in mid-January and then again in late January to push AMZN to lower lows.
• As of Friday’s last trade, the purple 50-day average line is holding up as support, but just barely. The next move under it could start a profit-taking avalanche.
• The one thing working in the stock’s favor right now is the lack of volume behind the selling, although there has been a distinct lack of buying volume as well.
Two months ago Visa was in real trouble … as were most names. It plugged into the same rebound that sent most stocks higher in January though, and is not only out of trouble, bat may be on the verge of a major move. That move should be higher too, given the recent action.
Ideally though, before breaking out, Visa would peel back a little, regroup, and then put the breakout thrust in place at a more sustainable pace.
Click to Enlarge • The line in the sand $146, plotted with a white dashed line. V is on pace to push above that level, but has become overextends since its mid-January low.
• There’s even more going on here than initially meets the eye. On the weekly chart we can see two years’ worth of unfettered rally that drove a divergence of all the key moving average lines. That divergence was reversed into a convergence last month — highlighted on the daily chart — which provides fuel for a fresh divergence.
• Though the undertow is bullish, a dip back to the blue 20-day or gray 100-day moving average lines would let the rally “reset” and provide a chance for the purple 50-day average to cross back above the white 200-day line … a buy signal in and of itself.
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.