The market managed to snap out of a two-day funk before it raced out of control, with the S&P 500 logging a gain of 0.36% on Thursday. Nevertheless, the volume behind the move was modest, and the weight of the gains since early June are still bearing down.
The gain took shape despite Netflix (NASDAQ:NFLX), which fell 11% after last quarter’s subscriber growth fell well short of estimates. Helping keep stocks in the black despite Netflix’s stumble, above others, were International Business Machines (NYSE:IBM) and Philip Morris International (NYSE:PM). Shares of Big Blue improved more than 4% following its second quarter earnings beat, and the cigarette company’s stock jumped more than 8% after it crushed its Q2 outlooks.
It’s the stock charts of eBay (NASDAQ:EBAY), Intel (NASDAQ:INTC) and Mohawk Industries (NYSE:MHK) that offer the most promising trade prospects as the week comes to a close, however. Here’s why, and what to look for.
It would be easy to give up on Intel here, after the reversal that began to take shape in late May seems to have stalled. It’s too soon to throw in the towel just yet, though. INTC stock has found support right where it needed to most, and may only simply be preparing its next move.
If such an effort is brewing and manages to take hold, however, there’s a fair amount of upside that could actually be captured in a short period of time.
• The support in question was offered by the critical 200-day moving average line, plotted in white on both stock charts. This week, it’s kept Intel from sinking any lower (highlighted).
• That support, however, will mean nothing until INTC stock moves above the gray 100-day moving average line, which more or less coincides with a handful of highs around the $50.50 level.
• The long-term pattern favors a move above current levels. Pushing up and off of a support level that now tags all the key lows since the beginning of 2018, plotted in red on both stock charts, a move to the $58 area would repeat and complete the pattern.
• Still, there’s a decided lack of volume behind the bullish effort thus far.
Mohawk Industries (MHK)
At the beginning of this month Mohawk Industries was pegged as a good breakout candidate. Though the thrust from June had rolled over, it found a technical floor at the idea spot and turned high again. The move underscored a much bigger upside effort that started to take shape late last year.
MHK has knocked over another impasse in the meantime. The technical ceiling that capped the early July gain where June’s peak was to be found has been hurdled as well. The backdrop isn’t too shabby either.
• The technical ceiling in question is $153.50, plotted in blue on both stock charts, marking where Mohawk made its last two highs.
• Though hardly above average, the volume that had been missing since the late-June bounce is finally starting to take shape.
• The rebound from last year’s miserable pullback puts that weakness well into the rearview mirror, but also leaves no clear technical ceiling. Last July’s high near $228 is the next most plausible resistance.
The initial reaction to Wednesday’s post-close earnings report from eBay was extreme bullishness, unwinding a sizeable (even if not earth-shattering) setback suffered during Wednesday’s regular hours action. It looked like the pause since mid-June was going to give way to a new rally.
Thursday’s bullishness faded quickly though, and in a big way. While EBAY stock still ended the day with a gain, it ended the day well below the highs, and the stage is set for much more weakness with even just the slightest of slipups.
• Tall bars made on high volume often indicate pivot points. In this case two consecutive tall bars on volume surges suggest that the profit-takers were and are tearing in, and were planning to do so no matter what.
• Zooming out to the weekly chart, we can see that the last overbought condition that coincided with a pullback from a tall weekly bar from early 2018 turned out to be a major pivot point as well.
• The key here is the $38.84 area, marked in yellow on the daily chart. That’s where eBay shares made a low on Wednesday, but also in late June. A move under that level could prove problematic.
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.