It was much worse at one point during the day, but even with Tuesday’s partial bounceback, the S&P 500 closed down to the tune of 0.26%. Investors remain hesitant to do much of anything until after they’ve had a chance to chew on today’s interest rate decision and rhetoric.
Pfizer (NYSE:PFE) led the charge lower, losing another 6.4% of its value as investors continue to jeer the decision to sell its Upjohn arm to rival Mylan (NASDAQ:MYL). Mylan, meanwhile, gained another 3% as investors cheered what seemingly looks like a great deal. Also working against the market in a big way was Gilead Sciences (NASDAQ:GILD). Shares of the pharma outfit were off to the tune of 1.1%, despite a respectable Q2 report that included impressive progress for sales of its HIV portfolio.
As for names worth a look at trading prospects here at the midpoint of the week, however, the stock charts of National-Oilwell Varco (NYSE:NOV), Southern Co (NYSE:SO) and CF Industries Holdings (NYSE:CF) top a short list. Here’s why, and what to look for.
CF Industries Holdings (CF)
For the first four months of the year, shares of CF Industries Holdings were stuck in a range, unable to hurdle the 200-day moving average line plotted in white on both stock charts.
The stock finally cleared that hurdle in June, but things have remained choppy all the same. It increasingly looks like the breakout move is the real deal, however, as CF shares continue to find support at other key lines in the sand. And, there’s little doubt about the underpinnings for the move, which only renews a long-standing uptrend.
Click to EnlargeTuesday’s action was not only productive, it was spurred by a push up and off of the 20-day moving average line plotted in blue.
- Although it’s likely to cool off again, even if just a little, the purple 50-day moving average line’s cross above the 200-day line. The ‘golden cross’ signals that new bullish momentum is fully developed.
- On the weekly chart it becomes clear that the last two key bottoms made in March and May better define a long-term support line that extends back to the middle of 2016.
Southern Co (SO)
A little over a week ago, Southern Co was highlighted as a name that was dancing more often with a crucial support level. Although it was still above it at the time, the rally since the beginning of the year left the utility name vulnerable to a big pullback.
There’s still a glimmer of hope in that regard. But, only a glimmers. Tuesday’s action took a pretty good-sized chunk out of that technical support, and did so in a way that waves a major red flag.
Click to Enlarge Although it didn’t close below it, SO stock temporarily traded below the 50-day line on Tuesday, and it did close under the straight-line support that extend back to the beginning of the year.
- Underscoring the blow sellers dealt to Southern Co shares is the volume surge behind the tumble. There may be a lot of would-be sellers waiting in the wings.
- If this pressure turns into something more, a pullback to the $51.50 area isn’t out of the question. That’s where a Fibonacci retracement line awaits, and where the white 200-day moving average line will soon be.
National-Oilwell Varco (NOV)
Finally, it was an earnings report that spurred the volatility. As such, traders should proceed with caution. It may not last.
Nevertheless, sometimes it’s news that’s required to jump-start a potential and even likely move. Now that the trigger has been released, National-Oilwell Varco shares could spend the next several days, or even weeks, following through on yesterday’s dynamic bar.
Click to EnlargeThe bears initially responded to the earnings report, dragging NOV into the red. With some time to think about it, however, they changed their mind. The intraday reversal speaks volumes about the underlying sentiment.
- Underscoring the likelihood that Tuesday is a pivot point is the volume spike behind it. A flood of sellers were finally flushed out, and a flood of new buyers poured in. It’s the opposite of what was witnessed in February.
- Although the stage is set for more upside, particularly given how oversold the stock has been since June, this is a setup that requires at least a little bit of follow-through to validate the swing.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley.