Stocks mustered a gain yesterday, but not the convincing one most investors were hoping for. The S&P 500 ended the day up 0.21%, willing to hold just above its 200-day moving average line, but not willing to push up and off of it. The volume behind the gain was also alarmingly thin.
Had it not been for General Electric (NYSE:GE), the market may not have made forward progress at all. Shares of the industrial giant were up 1.1%, not for any particular reason, but because enough investors now see a glimmer of hope for a real turnaround.
Dragging the market down more than any other names were Verizon Communications (NYSE:VZ) and Bank of America (NYSE:BAC). BofA stock was pressured by renewed industry-wide worries, while shares of the telecom giant tumbled 2.3% after UBS analyst John Hodulik downgraded the company from a “Buy” rating, suggesting there’s no real growth opportunity for Verizon to plug into.
None merit a closer look headed into Friday’s trading though. Rather, it’s the stock charts of AES (NYSE:AES), M&T Bank (NYSE:MTB) and Roper Technologies (NYSE:ROP) that merit the deeper looks. Here’s why, and what to look for.
Roper Technologies (ROP)
Roper Technologies may have gotten the new year started on the right foot, but slowly ran out of gas. By the beginning of this month, it had fallen into a sideways range.
By virtue of a lack of progress, however, that sideways movement has worked its way into to the edge of a cliff. One more misstep could push ROP stock over that edge and complete the slow, arching rollover move that began taking shape in April.
- As the daily chart readily shows, Roper has already fallen below its purple 50-day moving average line. The same chart also makes clear the bulls have established a key horizontal floor right at $340.50.
- Zooming out to a weekly chart we can tell how unusually bullish the past few months have been for ROP, as well as the fact that the RSI indicator has already started to unwind its overbought condition.
- If the sellers take hold in a big way, the most probable support area is still the 200-day line, plotted in white on both stock charts.
It’s now or never for shares of utility company AES.
After a nice rally early this year, the stock rolled over as more profit-taking ensued. The bulls finally stopped the bleeding early this month, and even teased a rebound move. But, that effort petered out as well and has since let AES stock fall back to that prior low. In the meantime, another pivotal support level has moved into place, forcing traders on both sides of the fence into a winner-take-all showdown.
- The level to watch is right around $15.85, where AES found a floor three weeks ago and again yesterday, and where the white 200-day moving average line is lying now.
- The importance of the 200-day line becomes much more evident on the weekly chart. It was the reason the longer-term rally was renewed late last year.
- Should the technical floor fail to keep AES shares propped up now, there’s a Fibonacci retracement line around $15.10. If things get really ugly though, the next Fib line at $13.13 also lines up with a semi-important support areas from the fall of last year.
M&T Bank (MTB)
With nothing more than a quick glance, M&T Bank shares look like they have more working against them than for them. The convergence of moving average lines is now acting as a very strong ceiling, and the bigger trend is bearish.
Although the odds point to more downside — which would be a trade worth taking if it pans out — there’s also a budding chance of a bullish turn here, which would also make for a decent trade. What happens within the next few days will be quite telling, and predictive.
- All four key moving average lines have converged around $165. Since convergences follow divergences and vice versa, at the very least we can expect much more net movement from here.
- Although that potential divergence could be bullish, the fact that MTB stock remains unable to move above any of those moving averages bodes poorly.
- Zooming out to the weekly chart we not only see a renewed bearish MACD condition, but a well-established bearish channel framed by two white, dashed line. There’s a ton of room to the lower edge of that zone.
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.