After a nasty four-day rout, the sellers finally gave long-term investors a break. The S&P 500 was up 1.3% on Tuesday, wiping away a small fraction of what has been recently lost.
Still, it’s far from assurance that the reversal effort is going to get traction.
Disney (NYSE:DIS) carried more than its fair share of the weight during the session, up more than 2% headed into its post-close earnings report. An earnings and revenue miss, however, sent DIS stock more than 3% lower in after-hours action. It’s poised to start today in the hole. Ford (NYSE:F) jumped 2.7% yesterday in response to an upgrade from Morgan Stanley, and was able to hold onto that gain.
Keeping the market’s gain in check more than any other name on Tuesday was Chesapeake Energy (NYSE:CHK). Shares of the natural gas company tumbled nearly 11% to a 20-year low after reporting a loss for its recently completed quarter.
None are compelling prospects moving into the midpoint of this week, however. Rather, it’s the stock charts of Dish Network (NASDAQ:DISH), Cardinal Health (NYSE:CAH) and Global Payments (NYSE:GPN) that merit the closest looks.
Global Payments (GPN)
Headed into July, it was impossible to argue that Global Payments shares weren’t overbought and ripe for profit-taking. The weekly chart’s RSI indicator hadn’t been overbought as high as it was since the beginning of 2018, and hadn’t been this overbought for as along as it had been in many, many years.
The weight of that big gain since the beginning of the year finally become unbearable last week, when marketwide selling finally knocked GPN stock off of its perch as well. A couple of key support levels were broken as a result. Even so, the most important floor here remains intact.
Click to EnlargeThat crucial floor is the 100-day moving average line, marked in gray on both stock charts. The bleeding stopped there on Monday, and the sellers didn’t even test it on Tuesday.
- Although the 100-day average is still intact as support, the purple 50-day moving average line isn’t. Neither are either of the straight-line support lines that kept Global Payments going higher since early this year.
- If the 100-day moving average line does fail to keep the stock propped up, the Fibonacci retracement line near $143 and then the 200-day moving average line plotted in white become the next most-likely floors.
Cardinal Health (CAH)
Cardinal Health shares have been fighting a losing battle since 2015, partially because it’s in the wrong business at the wrong time, and partly because it’s dealing with some company-specific challenges.
Although it’s still logging lower highs, the failure to make lower lows since late-2018 offered a glimmer of hope that the selling may finally be coming to a close and a new uptrend could be close to taking shape. As of Tuesday’s close though, CAH stock is one more bearish day from slipping back into a bearish paradigm.
Click to EnlargeThe make-or-break level is right around $42, marked in yellow on both stock charts. Yesterday was the third day that area acted as a floor.
- Adding bearish fuel to the fire is the repeated resistance seen at the 200-day moving average line plotted in white on both stock charts. The two most recent instances are highlighted on the daily chart.
- Should the floor at $42 break, the next most-likely floor is the line that connects all the key lows going back to 2015. Currently near $38, it’s marked in red on the weekly chart.
Dish Network (DISH)
Finally, back on July 25 I pointed out that Dish Network had just logged a telling bar. That is, on July 24, DISH stock formed an “outside day,” where that day’s range completely engulfed the previous day’s high/low range just with the open and close on the 25. It’s a strong clue that a major swing in sentiment had just materialized.
As scripted, the bears sank their teeth into Dish Network that same day, dragging the stock lower through Monday of this week … with some help from the market. Regardless of the context or reason though, on Tuesday we started to see subtle signs that the bears are done, and are now yielding to the bulls.
Click to EnlargeOne of those signs is of course Tuesday’s gain, as part of a hammer-shaped bar. The open and close near the high of a fairly tall bar indicates a transition from a net-selling to a net-buying environment.
- The volume bars also point to an end to the bearish pressure and the beginning of a bullish tide. The volume was falling all the way down, but was up a bit again on Tuesday when DISH stock was rising.
- Curiously, the low from Tuesday, and what may be the absolute low for this pullback, aligns with the low $30.90, plotted in yellow, from May that took shape right in front of a rather big rally.
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.