Teetering on the edge of a full-blown pullback as of Thursday, the bulls finally decided to make a stand. Friday’s 0.69% advance from the S&P 500 may not have undeniably averted a disaster, but it certainly let stocks end the week on a high note.
Amazon.com (NASDAQ:AMZN) did most of the heavy lifting, up nearly 2% in response to news that it was planning to open dozens of grocery stores in the near future … an announcement that ultimately shook shares of at least one competitor out of a budding uptrend. Smaller Chesapeake Energy (NYSE:CHK) was actually a bigger winner, however, rallying close to 6% as investors increasingly believe its turnaround effort is taking hold.
The market’s gain overcame the dead weight Tesla (NASDAQ:TSLA) brought to the table. Shares of the electric car company fell almost 8% in response to concerns that Tesla can’t actually afford to make the $35,000 Model 3 it touted on Thursday.
None of those names are especially well suited for trading as this week gets going, though. Rather, it’s the stock charts of Fastenal Company (NASDAQ:FAST), Nielsen Holdings (NYSE:NLSN) and Kroger (NYSE:KR) that appear to be entering well-developed trends.
Over the course of the past several months, we’ve watched Kroger shares bounce around inside of, and sometimes outside of, a narrowing trading range. Since December, the stock has spent more time below the floor of that range than above it, although it never really suffered that “death blow.” On Friday, however, the 4.5% stumble in response to news of Amazon’s grocery ambitions broke several key support lines.
There’s one more chance to salvage it, but the bulls are going to have to work a little magic to keep several months’ worth of indecision from becoming unleashed in a hurry.
Click to Enlarge • The shape and placement of Friday’s bar is the key. Kroger shares started above them all, but in one fell swoop the stock broke back under all three key moving average lines as well as the lower edge of the rising wedge, framed with yellow lines on both stock charts.
• The weekly chart puts things in perspective. Last year’s momentum has been slipping for a while now.
• The line in the sand is around $26.65, plotted with a red dashed line on both stock charts. That’s where Kroger found a bottom in October and again in December. That floor may not survive a third test.
Fastenal Company (FAST)
Fastenal Company is another name that’s made its way onto our radar several times in recent weeks, largely for the same reason as Kroger. That is, like KR, FAST shares have been bouncing around — rather reliably — within a wide trading range since 2016.
The recent bump into the upper boundary of that range has, as of Friday, started to become true trouble for the stock.
Click to Enlarge • There are actually two support lines in play here. The near-term minor one is plotted in yellow, and tagged all the key lows since the middle of last year. The ultimate floor, however, is plotted with a white dashed line on the weekly chart. It’s paired up with the uppermost ceiling at the top of both stock charts.
• That same weekly chart indicates Fastenal shares are stochastically overbought … a condition that tends to coincide with encounters of the upper edge of the trading range, and a condition that’s usually quickly ended with some significant selling.
• Still, although clearly vulnerable to more downside, this setup would be much stronger if the market helped, and if FAST can log at least one more lower close.
Nielsen Holdings (NLSN)
Finally, it’s still miles away from securing its place in a new uptrend. But, Nielsen Holdings has moved well enough to that condition to justify putting it on your radar now.
Just know that odds are good there will still be a time in the very foreseeable future that it doesn’t feel like NLSN has snapped out of the bearish funk that’s dragged it lower for the past couple of years.
Click to Enlarge • The “notice” is this past week’s push up and off the purple 50-day moving average line and, briefly anyway, back above the white 200-day moving average line. It’s the best attack on the long-term moving average line we’ve seen in months, underscored by strong volume.
• The weekly chart shows previous attempts to move above the 200-day average have petered out. This one is different, though, in the sense that it’s starting after what looks like a capitulation in July.
• Bear in mind a reversal out of a long-term downtrend like this one is more of a process and less of an event. It’s most likely that Nielsen will wiggle its way into an uptrend rather than make a clean “V.”
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.