Another day of lethargy and uncertainty, with the S&P 500 essentially breaking even on Tuesday. Volume wasn’t wild, but it was above the recent average, suggesting some traders are sneaking out of trades while things are quiet.
There were still major movers though. Netflix (NASDAQ:NFLX) was one of them, up a little more than 3% headed into its earnings report. Last quarter’s results were good, but its outlook was lackluster. However, NFLX stock held onto most of its regular-hours gains during the after-hours session.
At the other end of the spectrum, Tenet Healthcare (NYSE:THC) led a herd of healthcare plan stocks lower, giving up more than 11% of its value on a combination of profit-taking and worries about the future of healthcare with either party in the White House.
Neither are compelling prospects headed into today’s session though. Rather, it’s the stock charts of Western Digital (NASDAQ:WDC), UnitedHealth Group (NYSE:UNH) and Bank of America (NYSE:BAC) that merit the closest looks. Here’s what to look for.
Bank of America (BAC)
Bank of America is a name we’ve taken several looks at in recent weeks, as it continues to chip away at a technical ceiling. As of our last look on the last day of February, it hadn’t happened yet, but BAC was once again close to clearing resistance at $29.75.
That’s happened in the meantime, but BofA isn’t over its final hump just yet. The shape of Tuesday’s bar, however, is subtly bullish in that it implies the bears can’t keep BAC stock down, and the bulls are willing to buy en masse on big dips.
- Notice on the daily chart how yesterday’s open fairly deep in the red was almost entirely wiped away by the day’s end.
- Also notice on the daily chart that the bulls poured in on Friday and Tuesday. While no major progress was made, the market tipped its hand.
- The key, of course, is still clearing the new technical ceiling at $30.17, where BAC stock has peaked twice since mid-March.
UnitedHealth Group (UNH)
UnitedHealth Group might ring a bell. We’ve warned several times that the stock was rocking its way into trouble, and the resistance found at key moving average lines late last month only exacerbated the risks.
The worst-case scenario has been realized in the meantime. That is, the last bastion of technical support has been obliterated … and in the worst way possible. The shape of Tuesday’s bar opens the door to the possibility of a rebound, but if that effort crumbles, there’s little left that will be able to prop UNH stock up.
- On Friday, UnitedHealth shares fell under what would have ideally been a floor that tagged the December and March lows. It looked like the bulls would draw a line in the sand there, but they clearly didn’t.
- Yesterday was a bearish day, albeit not the worst kind. The worst kind would have happened after a prolonged rally.
- The volume spike that accompanied yesterday’s setback often indicates a capitulation, where the last of the sellers are flushed out and the first of the bargain hunters flood in. It could take a few days to determine if that’s the way things are going to pan out though. Getting back above that technical floor will be the key.
Western Digital (WDC)
In late February, we pointed out Western Digital shares were acting like they were in recovery mode. Although the effort may have only been to close a gap, that action had the potential to put a bigger recovery move into place.
That’s exactly how things have taken shape in the meantime. While the bulls and the bears have continued to grapple even after closing the gap, yesterday’s big gain may have dealt a decisive blow to the bearish pressure. It also pushed WDC stock above a key technical hurdle.
- Although the gap has been closed, the rally didn’t follow through straight-away. But, the slide back to the 50-day moving average line (highlighted) and push up and off of it may actually lay the better foundation.
- The big win on Tuesday was the break above the white 200-day moving average line at $53.16. This is the first time Western Digital has been above it since the middle of 2018.
- Zooming out to the weekly chart, it’s easy to see WDC stock is no stranger to major moves once the 200-day moving average line is crossed.
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.