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3 Big Stock Charts for Thursday: Seagate, Okta, and Pinduoduo

All seems well with the market, at least for now. And that would seem to suggest that Thursday’s big stock charts would take an optimistic tone.

big stock charts
Source: Shutterstock

After all, the S&P 500 posted back-to-back gains for the first time in six weeks. Incredibly, the Dow Jones Industrial Average re-entered a bull market in two days, if on a somewhat technical basis based on one common definition. (A bull market usually is defined as a market 20% above recent lows: that index rose 20.9% from Monday’s intraday low to Wednesday’s intraday high.)

It does seem like the equity markets have found a bottom. But ‘seem’ is the operative word. Risks abound. Earnings season looms in a couple of weeks. Payroll figures arrive Thursday morning. It would hardly be stunning if these gains reverse.

And so Thursday’s big stock charts focus on three names that suggest a bit of caution. That’s not to say that the bounce of the last two days definitely is going to reverse. Rather, to warn that it might.

3 Big Stock Charts: Seagate Technology (STX)

Seagate Technology (NASDAQ:STX)
Source: Provided by Finviz

The first of Thursday’s big stock charts looks concerning. At least from a technical standpoint, the rally in Seagate Technology (NASDAQ:STX) appears likely to reverse:

  • For the most part, STX stock did manage to hold support at August lows. But an intraday rally on Wednesday faded: Seagate stock at one point was up over 10% before falling back. The retreat confirms a bearish descending triangle pattern, and keeps the stock from a bullish reversal out of a longer-term descending wedge. A “death cross” only adds to the negative sentiment. It’s difficult to look at the chart and see anything but a proverbial “dead cat bounce.”
  • To be sure, the fundamental case seems very different. STX stock trades at just 11.3x trailing twelve-month adjusted earnings per share. Its dividend yields 5.6%. The business admittedly is cyclical, but recent results suggest it’s closer to a trough than a peak.
  • But even in the bull market, cheap wasn’t enough. Indeed, Seagate stock is down almost 20% over the past six years; including dividends, investors have eked a roughly 2% annualized return. The intraday fade on Wednesday certainly suggest that investors see value elsewhere, as they did even before markets turned south.

Okta (OKTA)

Source: Provided by Finviz

Okta (NASDAQ:OKTA) stock was left out of Wednesday’s rally, declining an even 5%. And as the second of our big stock charts shows, that’s a short-term concern:

  • OKTA did establish a multiple bottom a few sessions back. But it looks, at least for now, like that rally has come to an end. The stock failed a test of the 50-day moving average, and dipped back below the 200-day as well. Particularly in the context of a broad market rally, trading Wednesday looks concerning.
  • But that trading also isn’t necessarily surprising. As we noted in yesterday’s Big Stock Charts, short-term winners lost during Tuesday’s huge rally. The two biggest decliners among mid-cap or larger stocks were Zoom Video Communications (NASDAQ:ZM) and Vir Biotechnology (NASDAQ:VIR), both of which have rallied through the sell-off. Two other recent winners have sold off: Netflix (NASDAQ:NFLX) and Teladoc Health (NYSE:TDOC) both are on two-session losing streaks.
  • OKTA stock, given the potentially higher importance of cybersecurity in this crisis, had mostly held up. And so the decline on Wednesday perhaps isn’t that surprising: investors rotated out of near-term winners into stocks that have seen steeper declines. But that sets up an interesting near-term outlook for the likes of OKTA: it may be that the stock won’t rally unless or until the rest of the market starts weakening again.

Pinduoduo (PDD)

Pinduoduo (NASDAQ:PDD)
Source: Provided by Finviz

Like STX, Pinduoduo (NASDAQ:PDD) stock saw an intraday fade. And like STX, the third of Thursday’s big stock charts suggests some near-term concern:

  • The fade confirms a descending triangle pattern which suggests increasing pressure on support that’s held around $31. Trading in PDD stock has been almost textbook the past few months, with a bearish head-and-shoulders pattern leading to a return almost exactly to November lows. If the recent rally reverses, PDD is going to re-test that support and has a good chance of falling through it.
  • A reversal wouldn’t be stunning. Even with the recent bounce, this still looks like a “risk-off” market. And a Chinese e-commerce company that was unprofitable in 2019 hardly seems like a low-risk play. Fourth quarter earnings earlier this month were solid, but hardly spectacular. China does seem to be recovering from the coronavirus, but any sign of a renewed epidemic could send PDD stock tumbling.
  • And so PDD stock seems like an interesting test for the market. This is a stock that seemed well-suited for the market that existed in the second half of 2019 when the stock roughly doubled. But this simply might be a different market now — and that might mean returns for Pinduoduo stock look very different.

Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.

Article printed from InvestorPlace Media, https://investorplace.com/2020/03/3-big-stock-charts-for-thursday-seagate-okta-and-pinduoduo/.

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