Wednesday may be a big day for U.S. stocks. The escalation of tensions in the Middle East pressured stock futures and sent gold and oil higher. Since the end of 2018, equities have shown impressive resilience. This week provides the biggest potential test since the sharp sell-off that began in October of that year.
That external pressure gives added impetus to Wednesday’s big stock charts. All three stocks seem to be at, or at least approaching, a potential inflection point. None look strong enough to fight through a falling market on their own.
And so as with the big stock charts covered on Tuesday, external help from the market is needed. At least at the moment, it doesn’t look like that help is on the way.
Verizon Communications (VZ)
Verizon Communications (NYSE:VZ) isn’t necessarily in trouble. After all, VZ stock isn’t the type to make a huge move in anything but the most bearish of environments. But the first of Monday’s big stock charts is worrisome:
- VZ stock needs to find support. Shares have made a bearish reversal out of a narrowing ascending wedge pattern. There’s a bit of a head-and-shoulders pattern in mid-December trading. And declines have accelerated in recent sessions on reasonably heavy volume. The 200-day moving average below $59 seems to be the next key support level — from there, there’s at least a technical case for shares to re-test August lows below $55.
- Admittedly, such a plunge (and ~10% is a plunge when it comes to VZ) seems unlikely. It’s possible Verizon stock could see buyers in a more nervous market. The same flight to safety that has boosted gold should lead to higher Treasury prices and lower yields. In that context, the 4.13% yield currently offered by Verizon stock, a defensive name, would seem even more attractive.
All told, Wednesday’s trading looks rather important. Does Verizon stock benefit from a flight to safety? Or does selling pressure continue? Investors watching AT&T (NYSE:T) should pay attention as well. T stock too could benefit from investors looking from yield — and also is at risk of a similar bearish reversal out of its own ascending wedge. If the two telecommunications giants struggle this week, more selling in the sector could lie ahead.
Take-Two Interactive (TTWO)
The second of our big stock charts, Take-Two Interactive (NASDAQ:TTWO), looks rather bullish. There’s a nice path to a near-term rally, assuming the broader market cooperates:
- TTWO stock has exited a triangle pattern with a nice rally in recent sessions. Shares have bounced off near-term moving averages. And a clear uptrend has been established as part of a usually bullish ascending triangle. This looks like a stock set to challenge September highs above $130, and that might have enough momentum to clear past resistance and reach new highs above $140.
- The chart looks even better in the context of the space. Video game rivals Activision Blizzard (NASDAQ:ATVI) and Electronic Arts (NASDAQ:EA) have broken out. EA stock in fact was one of our big stock charts about six weeks ago, with a somewhat similar setup. It’s rallied about 10% since.
- The key difference between the two video game rivals might be the external environment. ATVI and EA stock broke out amid strength across U.S. stocks, and particularly in tech. TTWO stock has benefited from some of that tailwind over the last two months — but may not have the same momentum behind it going forward.
Tractor Supply (TSCO)
Tractor Supply (NASDAQ:TSCO) has been one of the S&P 500’s weakest stocks over the past six months. The third of Wednesday’s big stock charts suggests it could get worse:
- The near-term question is whether TSCO stock can establish a double bottom around $89, after testing that level in late September. There’s some reason to believe that it can.
Notably, the weekly chart shows that $90 is a key level, as it swapped from resistance to support in 2018. There’s an intriguing fundamental case as well. A 17x forward earnings multiple is not particularly onerous. Farm income almost has to bounce back at some point following several difficult years, which would be a tailwind for the rural-focused retailer. Tariff resolutions could help as well.
- But here, too, the external environment is a worry. So is the trading. The declines in TSCO since August seem somewhat odd, given that Q3 earnings in October were decent and that stocks on the whole have rallied. That said, investors who follow the chart often believe that the market mostly knows what it’s doing. That market has sold off TSCO for several months now — and likely will do so again if U.S. stocks turn south.
As of this writing, Vince Martin has no positions in any securities mentioned.