The bulls tried, but it was never going to happen. The S&P 500 fell 0.34% on Tuesday, sliding lower on sizeable volume, calling into question just how much more stocks can climb.
At the other end of the spectrum, Roku (NASDAQ:ROKU) soared more than 7% after being one of the big hits of this year’s Prime Day, while Blue Apron Holdings (NYSE:APRN) was up more than 30%. Shares of the meal-kit company rallied on word that it was partnering up with Beyond Meat (NASDAQ:BYND) to offer meatless-hamburger meal options.
However, as for names that merit a closer trading look headed into Wednesday’s session, it’s the stock charts of Delta Air Lines (NYSE:DAL), Salesforce (NYSE:CRM) and American Airlines Group (NASDAQ:AAL) that are of the most interest. Here’s what to look for.
Delta Air Lines (DAL)
With nothing more than a quick glance, Delta Air Lines look like a rocket. A large number of people saw last month’s big move, wanted to plug into it, and fueled even more bullishness with that buying. Volume has been particularly strong of late.
Caution is advised though. This is action we’ve seen from DAL stock multiple times since early 2017, and sooner or later, each of these run-ups end with a sizeable pullback. That pattern, in fact, has been alarmingly well established, and shares are within sight of a familiar technical ceiling.
- The big boundary here is right around $64, where the upper boundary of a trading range that extends back to late-2016 currently rests.
- The weekly chart is already stochastically overbought, which has proven problematic rather quickly over the course of the past couple of years.
- Although its ripe for a wave of profit-taking, the precise tops within the confines of the trading range have never been clear.
American Airlines Group (AAL)
While Delta looks like it may be near a major peak, shares of rival American Airlines appear as if they’re just getting started on a breakout move. That effort gelled in a huge way on Tuesday though, as the last vestige of resistance was rolled over. There’s still a chance the advance could fall apart before it gets going in earnest, but the foundation is actually — even if subtly — rather firm.
- The “trigger” here is Tuesday’s move above the 200-day moving average line, plotted in white on both stock charts.
- Fanning the bullish flames is the way this week’s gain has pushed AAL stock above the upper boundary of a descending wedge. This convergence builds up pressure that, once unleashed, can fuel a prolonged rally.
- Although Tuesday’s action was catalytic, it could take several more days before the breakout thrust gels above the pivotal 200-day moving average line.
When Saleforce was last examined in early May, it was well up since the end of last year, but putting pressure on the lower boundary of a short-term trading range. It was also acting overbought, struggling to continue making forward progress with or without the trading range. A month later, it had broken below its 200-day moving average line.
The bulls pushed back, dragging CRM back above the 200-day moving average line (plotted in white on both stock charts) with a pretty impressive jolt. The bears are growling again though, and yesterday’s action waves several red flags.
- One of those red flags is the shape and placement of Tuesday’s bar. The open above Monday’s high and close below Monday’s low constitutes an “outside day,” which portends weakness.
- It’s imperceptible on both stock charts, but as of Tuesday, the 200-day moving average line is sloped downward. It’s an indication of longer-term weakness.
- Should the 200-day moving average line fail to act as a floor, if tested again, the next most likely landing spot is the Fibonacci retracement line near $129.
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.