What started out as a winner didn’t end that way. Driven by multiple reasons, including concerns President Donald Trump might be impeached to broad worries about consumer confidence, the S&P 500 ran to a loss of 0.84% for the day.
Chesapeake Energy (NYSE:CHK) led the charge, falling nearly 6% in step with a similar setback for crude and natural gas prices. At the other end of the spectrum, Boeing (NYSE:BA) was up a little more than 1% on the heels of reports that its beleaguered 737 MAX jet is at least one step closer to being re-approved by the International Air Transport Association. There just weren’t enough names like Boeing to keep stocks out of the red.
Walt Disney (DIS)
Walt Disney shares looked unstoppable earlier in the year, with the bulk of the 2019 gain taking shape in April. DIS stock bolted higher on April 12 after unveiling its new streaming service that could prove a threat to Netflix (NASDAQ:NFLX). Although they’ve been overbought as a result, shares have held that ground gained then.
That’s quickly changing though. In fact, the pace and scope of the recent weakness may well be enough to drag DIS stock under a key technical support level that has taken shape since May. Given the undertow, it seems unlikely it will hold up as a floor again.
Click to EnlargeThe line in the sand is $130.73, plotted as a yellow-dashed line on both stock charts. The last time it acted as a floor was in August, and it’s nearing another test.
- It’s visible on the daily chart, but tricky to see. On the weekly chart though, it’s rather clear we’ve seen above-average selling volume since late June.
- Should the floor near $130.73 break, a slide all the way back to below $110 is possible. That’s where the floor that connects all the major lows since 2016 is found, marked in light blue.
A little more than a week ago, Visa (NYSE:V) was featured as a potential bearish prospect. While it had made a heroic move since early 2017, the weight of that big move was bearing down. Telltale signs of a breakdown were taking shape.
That’s what makes the similar hints dropped by credit card peer Mastercard so interesting and telling. Industry peers tend to move in tandem, so to see them both more or less doing the same, we have to take the clues seriously.
Click to EnlargeChief among the bearish clues is that as of last week, the blue 20-day moving average line and the purple 50-day moving average line that had been acting as a floor have been acting as a ceiling.
- The gray 100-day moving average line is the key. It acted as support in August (highlighted), and although it’s not easily seen on the daily chart, the 100-day average was a major technical support in 2017 and 2018.
- Also evident on the weekly chart is the fact that the peak from earlier this month may have been prompted by a bump into the same technical ceiling that tags the string of higher highs made in 2018.
Finally, Starbucks was a solid winner late last year and into this year. But, it went absolutely ballistic beginning in May.
That red hot move, however, may have ultimately driven SBUX shares into what’s more or less a blowoff top … a buying frenzy that flushes out the last of the would-be buyers. The make-or-break factor has been tested fairly vigorously since last week.
Click to EnlargeThe make-or-break level is around $89.40, marked as a purple dashed line on both stock charts. That’s where Starbucks found a low several times over the course of the past three weeks.
- You can somewhat tell on the daily chart, but the fact that the weekly chart’s Chaikin line has recently crossed under the zero level says the chart’s volume has turned net-bearish.
- Although the floor at $89.40 needs to snap first before it even matters, should it break down as a floor, the next most likely floor is around $80, where the white 200-day moving average line and straight-line support plotted in blue can be found.
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.