What started out as a great day for the market quickly turned into a poor one by the time the closing bell rang. Down from a peak of 3,021.99, the S&P 500’s close of 3,006.76 was almost a dead breakeven.
Blame cigarette giant Altria Group (NYSE:MO) and entertainment icon Disney (NYSE:DIS) for the broad lethargy, at least more so than any other name. Altria shares fell nearly 2% on the growing realization that vaping isn’t going to offset the headwind traditional tobacco usage is facing, while Disney slumped 2.5% after Imperial Capital analyst David Miller cautioned that its film arm could prove a lackluster profit center going forward.
Microsoft (NASDAQ:MSFT) deserves most of the credit for keeping the S&P 500 out of the red yesterday. It ended the session up nearly 2% on the heels or report it was upping its buyback plans and raising its quarterly dividend to 51 cents per share.
Seagate Technology (STX)
Seagate Technology shares took a hit on Thursday after raising its fiscal Q1 earnings guidance without upping its revenue outlook. The market was expecting more on both fronts though. Most investors chalked up the tumble to nothing more than that, and perhaps that’s all it was.
Sometimes though, it’s a headline that prompts a technical move that was trying to take shape anyway. That’s arguably what happened with STX stock yesterday, putting into motion what is very likely to turn into a sizeable downtrend.
Click to EnlargeA careful look at the daily chart illustrates that the rally since early August had already slowed to a crawl as of last week. One of two possible resistance levels, in red or purple, that extend back several months did the deed.
- Zooming out to the weekly timeframe shows us another technical line … the upper boundary of a converging wedge shape that ultimately materialized with 2015’s peak. Framed in light blue lines, the lower boundary could let shares slide all the way back to below $30.
- Before the stock can slide all the way back to $30, however, it would have to break under a much closer support line around $44, marked in yellow on both stock charts, extending the major lows since late last year.
The last time Weyerhaeuser was on the radar back on Sept. 3, it was knocking on the door of a breakout move, but that door had not yet opened. Specifically, the upper boundary of a converging wedge shape was being attacked from below, and a handful of hints suggested it was only a matter of time before that bullish move took shape.
It has panned out as expected in the meantime. In fact, a different technical ceiling that was only on the horizon then has also been hurdled. Although overextended now, the move itself makes a recovery more likely, and likely to be more rewarding than WY stock has been since early August.
Click to EnlargeThe pattern that was so telling at the time is the converging wedge shape, plotted as yellow lines on both stock charts.
- It was already in place at the time, but has gelled in the meantime. That is, the purple 50-day moving average line is now further above the white 200-day moving average line (highlighted on both stock charts), confirming the bullish clue of that “golden cross.”
- The other technical ceiling that meant little at the time but means much more now is the $27.60 area, where Weyerhaeuser had topped a few times earlier this year. It’s marked as a red dashed line.
- The weekly chart makes clear there’s a massive amount of room — between $28 and $34 — for WY stock to recoup last year’s now-unmerited losses.
Expedia Group (EXPE)
Finally, Expedia Group is no stranger to big swings. It has been all over the map since the middle of last year, even more so than most stocks. That’s just the nature of travel-related names, which are not only cyclical, but subject to the rapid changes in the price of crude oil (which subsequently changes the cost of traveling).
There’s actually been a clear method to the madness, however, that suggests the current rally effort has more backing than it may seem on the surface. One more good nudge may well do the trick, as long as the economy does its part and remains robust.
Click to EnlargeIt would have been easy to overlook given the erratic nature of the chart of late, but beginning last month, the gray 100-day moving average line finally started to offer clear technical support.
- Simultaneously, straight-line support has started to take shape, marked as a red dashed line on the daily chart.
- Yesterday’s peak around $136 aligns with a frequented ceiling since September of last year, marked in yellow.
- The underpinnings for a great deal more upside are easily identified on the weekly chart, where a long-term bullish trading channel is framed by blue lines. EXPE stock has only recently pushed up and off the lower boundary, and could climb to $190 or higher before finding real resistance.
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.