The market started the new trading week the same way it ended the old one … badly. The S&P 500 fell nearly 3% with Monday’s action. However, the opening gap and the sheer scope of the selloff since early last week sets the stage for at least some sort of bullish pushback.
Bellwether Apple (NASDAQ:AAPL) led the charge, falling more than 5% during the regular hours session on worries that an intensifying trade war would impact it more than others. AAPL stock was down another 2% in Monday’s after-hours action. Meanwhile, Bank of America (NYSE:BAC) was lower by more than 4% on concerns that an economic slowdown and another rate cut could prove problematic for it.
Fear more than anything else, however, is what took a toll on the broad market.
That doesn’t mean it won’t continue taking a toll though, leaving traders in something of a lurch as the week continues.
To that end, it’s the stock charts of Pfizer (NYSE:PFE), AES (NYSE:AES) and Centurylink (NYSE:CTL) that appear to be best positioned for a reliable swing, even if they all still need the market’s cooperation.
Centurylink is a name that has been on the radar since the first quarter of the year. With the most recent look from mid-June, CTL had pushed above a couple of different resistance lines, and was applying pressure to its 50-day moving average line that was acting as a ceiling at the time.
The 50-day moving average line has been hurdled in the meantime. In fact, it has since begun acting as support. With just a little more forward progress and a couple more technical leaps that are in the path ahead though, there’s little bearish argument that will be left intact.
Click to EnlargeThose last two technical events that will proverbially seal the deal on new bullishness are a cross of the purple 50-day moving average above the gray 100-day average line, and a move above the recent ceiling at $12.42 plotted in blue on both stock charts.
- The odds of such a move are strong, given how Centurylink has logged higher lows and higher highs since May’s pivot even though the broad market hasn’t.
- Although it’s not a factor yet, should CTL be able to move above the ceiling at $12.42, the next line to watch is the 200-day moving average line plotted in white on both stock charts.
Undoubtedly it has more to do with the market and with politics than Pfizer itself. Nevertheless, the chart of the drugmaker’s stock is what it is. And what it is, is a name that has been severely oversold for a bevy of reasons over the course of the past week.
The sheer scope of the selloff is unusual though, setting the stage for a potential bounceback. Underscoring that prospect is where and when PFE stock finally stopped falling on Monday. It’s right at one key floor, and close enough to another one to say investors are at least thinking it could be trying to act as support.
Click to EnlargeThe near-term floor in question is plotted as a falling blue line on both stock charts. Monday’s low traces most of the low points seen since late last year.
- Bolstering the bearish case is the purple 50-day moving average line’s cross back under the 200-day moving average line, plotted in white on both stock charts.
- Nevertheless, the gap left behind with last week’s big plunge and the way Pfizer stock is dancing with the support line that tags all the major lows going back to early 2016 suggests this is where the bulls are most likely to take a stand.
Finally, AES rolled higher in 2018, seemingly unaffected by the weakness that proved problematic for most other names in the last quarter of last year. This year has been a solid one for AES as well, even with the second-quarter pullback (which was a pullback from a record high).
As of Monday though, AES stock is in significant technical trouble. The 3% setback was enough to pull AES stock below a couple of different key support levels. There’s still a chance it could snap back into bullish mode, but should AES linger at its current value or make lower lows, there’s little left to stop the bleeding.
Click to EnlargeOne of the critical support levels that was just shattered is the 200-day moving average line, plotted in white on the daily stock chart. It had been a technical floor a couple of times in recent months.
- The daily chart’s action since mid-June is also telling, in a bearish way. It bounced around between two key moving average lines, but transitioned from a net-bullish to net-bearish mode on Monday.
- Zooming out to the weekly chart, the rising support level that had kept the rally in motion since turning in early 2018 finally failed to keep AES propped up with Monday’s setback.
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.