The market was higher and lower on Friday, but when all was said and done, it essentially ended the day flat. The S&P 500 finished last week’s action essentially flat, gaining a tiny 0.06% … the usual modest action we see before a three-day weekend, on the usual modest volume.
General Electric (NYSE:GE) may have been the ultimate reason stocks finished the week on a (barely) high note. It gained 1.8% on Friday, rallying on a partial legal victory that should ease its vulnerability to a lawsuit that alleges accounting fraud. The suit now must prove there was forehand knowledge of accounting problems that have become nightmarish for the organization and its shareholders.
And, the market managed to overcome the drag that Chesapeake Energy (NYSE:CHK) proved to be on Friday, when it slumped more than 6%. There was no news, but a major selloff in crude oil and natural gas tripped up most names in the industry.
As the new, shortened trading week gets going though, it’s the stock charts of Western Digital (NASDAQ:WDC), Weyerhaeuser (NYSE:WY) and Air Products & Chemicals (NYSE:APD) that deserve the closest looks. Here’s why, and what to look for next.
Weyerhaeuser suffered the same rough end to 2018 most other stocks did. But, it hasn’t enjoyed the same rebound most other names have mustered so far in 2019. Rather, the stock has seemingly been stuck on a range.
Slowly but surely though, that’s changing. While WY stock may remain trapped between support and resistance, it’s also starting to find support in places where it hadn’t. In the meantime, a handful of momentum indicators have flipped to a bullish mode.
Click to EnlargeChief among the momentum-driven clues is the moving averages, and the purple 50-day moving average line in particular. It has moved above the 200-day moving average line, marked in white, for the first time in months.
- Since peaking in April, and really since late last year, Weyerhaeuser shares have been getting squeezed into the narrowing tip of a converging wedge pattern, framed by yellow dashed lines on both charts.
- The upper boundary of the wedge pattern may break soon, but even if it does, there’s another ceiling just above. The $27.60 area was established as a proven technical resistance area in the first quarter of the year.
Air Products & Chemicals (APD)
With nothing more than a passing glance, it would be easy to just say Air Products & Chemicals shares are bouncing around, moving sideways after a big runup over the course of the first half of the year. And, perhaps that’s all that’s happening at this time.
A longer, more detailed examination of the chart since the end of July, however, reveals there may be more going on than it superficially seems. A pullback may be brewing, and the stock’s vulnerability could be even more pronounced because of the 44% advance that took shape between January and July.
Click to EnlargeThe biggest red flag is the streak of lower highs that has taken shape since the late-July peak, plotted as a yellow dashed line on the daily chart.
- Additionally, notice how APD stock has broken back under the purple 50-day moving average line, as has the blue 20-day moving average line, for the first times since March.
- Zooming out to the weekly chart we not only see a bearish MACD indicator, but the Chaikin line has taken a huge trip from a very high level in May to back under zero now. It’s a sign that the volume trend turned decidedly bearish, and started to do so even before shares peaked and reversed.
- Should things get worse, the most plausible support level is around $160, where the stock bounced around in a narrow range for all of 2018.
Western Digital (WDC)
Finally, the rebound Western Digital stock has been working on since the beginning of this year has really taken hold. It’s not yet over a key hump, and has another one to test following that. But, we’re starting to see support where we need to see it most, and starting to see momentum indicators solidify in a major way.
Click to EnlargeThe major highs going back to November are rather well aligned, marked as a red dashed line on both stock charts. That’s the ultimate line in the sand. Notice it may be the neckline of what eventually turns into a head-and-shoulders pattern.
- In the meantime, the more immediate ceiling is just under $58, marked as a yellow line on both stock charts, where shares have peaked a few times since the latter half of July.
- Not only is the purple 50-day moving average line now above the white 200-day moving average line — a so-called golden cross, indicative of sustained momentum — the 50-day line offered the support needed to force last week’s bounce out of a pullback.
- Any real breakout wouldn’t face its next significant technical test until it finds the turbulence around the $85 it went through in 2017 and early 2018.
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.