Much like Monday, on Tuesday, traders weren’t quite sure which direction they wanted to go. And, when all was said and done, they didn’t really go anywhere. The S&P 500 ended yesterday’s action 0.07% lower than Monday’s close, and more or less in the middle of the day’s high/low range.
That doesn’t mean there weren’t big movers though. Holding the market back in a big way was Home Depot (NYSE:HD). Shares of the home improvement retailer fell nearly 1% in response to a fourth quarter earnings miss and lackluster profit outlook for 2019.
At the other end of the spectrum, China’s upscale electric carmaker Nio (NYSE:NIO) rallied 8.6% following Monday’s 60 Minutes interview with CEO William Li. For some investors, it was the first they’d ever heard of the company, driving a sudden wave of interest. Etsy (NASDAQ:ETSY) fared even better though, up 16.3% following a fourth-quarter earnings and revenue beat. There was just more bearish volume than bullish volume on Tuesday, and more advancers than decliners.
As Wednesday’s action gets going, it’s the stock charts of Cabot Oil & Gas (NYSE:COG), Incyte (NASDAQ:INCY) and Sempra Energy (NYSE:SRE) that offer the most trading potential. Here’s why, and what to look for.
Sempra Energy (SRE)
At first glance Sempra Energy is little more than a volatile mess. But, a closer inspection reveals there’s actually a relatively organized effort underway.
One more good shove and months worth of consolidation could readily turn into a nice breakout thrust.
Click to Enlarge • Though apparent on the daily chart, it’s better appreciated on the weekly chart that SRE shares are being ushered higher by a set of parallel support and resistance lines, plotted in blue. Sempra shares just pushed off the lower edge of the range near the end of last year.
• In the meantime, clear resistance has formed around $120, plotted with a yellow dashed line on both stock charts.
• While we’ve seen bullish thrusts fail before, this one is different. This time, the pullback seen earlier this month was halted and reversed at a convergence of several key moving average lines. It’s a sign that the bulls have finally drawn a line in the sand.
Cabot Oil & Gas (COG)
If Cabot Oil & Gas rings a bell, there’s a reason. It was one of the stock charts featured back on Feb. 20, after several weeks’ worth of volatility finally began to make discernible progress. While more up and down was in the cards, the undertow had turned bullish.
COG shares promptly pulled back the very next day, calling the thesis into question. But since then, the uptrend has been rekindled after COG found support right where it needed to.
Click to Enlarge • Last week’s pullback stopped at the 200-day moving average line, plotted in white, and was firmly reversed.
• While still volatile, notice the 200-day moving average as well as the gray 100-day moving average line are both sloped upward now, confirming the overall trend is bullish.
• Zooming out to the weekly chart we can see the slow, U-shaped reversal that has been taking shape since the middle of last year, aided by a long-standing support line.
• Though the tide is bullish here, Cabot Oil & Gas still faces minor resistance at $25.20 and major resistance right around $26.
Finally, Incyte has been featured several times since the middle of last year as a breakout candidate. It didn’t happen in earnest until January though, and it ultimately took a bearish headfake to set the move up. And even then, there was doubt.
The breakout thrust has really firmed up over the course of the past month, however, and is worth a refreshed look. While some profit-taking is likely to be in the cards, the recent gain has developed enough cushion to make a small setback not only palatable, but productive.
Click to Enlarge • The big line in the sand was at $74.90, plotted in red on both stock charts. Shares punched through that ceiling in early January, and have put some distance between them and it in the meantime.
• While the divergence sends a statement, it’s also clear that even just the move since early January has brought INCY to the brink of being overbought. A dip that burns off that froth would actually be bullish, in the bigger picture.
• Any pullback would ideally (and probably would be) stopped and reversed either the purple 50-day moving average line or the gray 100-day average.
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.