It took a while to get going, but once the buyers stepped up on Wednesday, they didn’t look back. Once the S&P 500 was moving, its 0.47% gain carried it to a record-high close of 3,019.56.
Snap (NYSE:SNAP) led the charge with its 18.75% gain. The social media newcomer aced last quarter’s earnings and sales estimates, but more importantly, drove its best user growth since 2016. Sprint (NYSE:S) was a champ too though, rallying more than 8% during the regular session and gaining nearly 2% in after-hours trading in anticipation that its long-impending merger with T-Mobile (NASDAQ:TMUS) could be ultimately approved before the end of the week.
All of them have moved too explosively to handicap headed into Thursday’s session though. Rather, the stock charts of AT&T (NYSE:T), DISH Network (NASDAQ:DISH) and Discovery (NASDAQ:DISCA) have emerged as the best bets.
DISH Network (DISH)
The breakout move Dish Network shares mustered in late May and early June was the real deal, and still stands. DISH stock was pushed sharply lower in 2017 and 2018, and has a great deal of room to continue recovering.
That recovery isn’t likely to continue in a straight line though. In fact, the already overbought DISH stock moved into problematic territory early this week. Its new vulnerability has started to become a true problem with yesterday’s bar that took shape on word that it would be buying some of the assets forced to be sold in order for T-Mobile and Sprint to merge.
Click to EnlargeIt’s called a bearish outside day, where one day’s open is above the prior day’s high and the close on that same day is below the prior day’s low. It’s a sign of a sudden but decided change of heart, in this case, for the worst.
- Underscoring the sharp shift in sentiment is the volume behind Wednesday’s reversal. One more small step forward opened the floodgates of profit-taking.
- The weight of the rally since the end of last year is enormous. Dish Network shares’ RSI indicator pushed above 70, into overbought territory last week, which it rarely ever does.
AT&T has been recovering reasonably well from a 2017/2018 meltdown. In March, it firmly broke above a falling resistance line plotted in yellow on the weekly chart, and though erratic, has continued to make higher highs in the meantime.
That rebound was threatened last week and early this week by a strong wave of selling that materialized on even stronger volume. But, the action over the course of the prior three days confirms it’s still intact. In fact, it may be even stronger than initially presumed.
Click to EnlargeTuesday’s hammer-shaped reversal bar followed by a major bullish follow-through on Wednesday forms what’s called a “morning star,” where the middle bar acts as the pivot.
- Underscoring the pivot action is that Tuesday’s bar was a high-volume affair, followed by even more volume on Wednesday. Volume spikes tend to also mark pivots, as T stock has demonstrated more than once on the daily chart.
- Still, there’s something about last month’s high at $34.37. The weekly chart indicates that level was also a ceiling a couple of times last year.
Most stocks dance from time-to-time with their most important moving average lines, finding support and resistance there. In many cases, a cross of two moving average lines can serve as a major bullish or bearish clues.
Few stocks are as subject to the guidance of their moving average lines as Discovery is, however. And, given the context of this week’s trading action, investors would be wise to heed the clues, even if there’s room for a bit of volatility in the “wrong” direction.
Click to EnlargeAs of last week, even when DISCA stock was peeling back from its June rally, we saw a golden cross, where the purple 50-day moving average line crosses above the white 200-day line.
- We’re also on the verge of seeing the gray 100-day average move above the white 200-day moving average line, underscoring the idea that the tide is bullish.
- Backing out to a view of the weekly timeframe, the advance is no major surprise. It started early in the year by a visit with a rising support line that has been in place since the late-2017 low.
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.