From the beginning of 2015 through Feb. 21 of this year, the S&P 500 moved more than 2.8% in a single day just fourteen times in over five years. It’s done so six times just in the last eight sessions.
That includes a 4.2% gain on Wednesday, which in turn followed a 2.8% decline on Tuesday, and a 4.6% rise the day before. To say trading has been volatile is an understatement.
Amid that volatility, in Big Stock Charts we’ve tried to highlight the biggest movers in the market in a bid to understand where the market is headed.
These monster swings do make technical analysis somewhat difficult. A level of support or resistance that held in early January’s calm yet optimistic market may not have the same power when U.S. stocks more broadly are plunging — or soaring. But charts still have value in wild trading, and the hope is that the charts of the stocks grabbing the most investor attention will highlight underlying trends across the market more broadly.
In that context, Thursday’s big stock charts focus on three winners from Wednesday’s trading. And those winners, and their charts, suggest some reason for optimism. They show that U.S. stocks at least have the potential to get back on track going forward.
After the last two weeks, investors would be forgiven for caution, and even skepticism, toward the idea that the worst is over. But these three names do have room to continue rallying if and when investor nerves finally settle.
As the first of Thursday’s big stock charts shows, trading in Shopify (NYSE:SHOP) is impressive given the state of the market right now:
- Shopify stock, after all, might well be the most expensive in the market. There’s only one stock with a market capitalization over $30 billion and a price-to-revenue multiple even close to that of SHOP: Zoom Video Technologies (NASDAQ:ZM), which actually has benefited from the spread of the coronavirus. Despite that hefty valuation, SHOP has performed reasonably well in an obviously nervous market.
- There has been enormous volatility, with Shopify stock climbing almost 8% after a fourth quarter earnings beat last month and then reversing amid broader sell-offs. But the trend line remains positive. Shares have gained 29% year-to-date, while the NASDAQ Composite is up just 0.5% YTD after Wednesday’s 3.85% rally.
- And after Wednesday’s gains, the outlook remains reasonably positive. SHOP has reclaimed the 20-day moving average which acted as support throughout the rally off November lows. A breach of the 50DMA quickly and sharply reversed. Taking the broad view, this remains a stock that looks set to continue to gain if broad markets simply settle, let alone recapture past highs.
- Of course, both market bulls and bears might see that fact as confirming their respective positions. To bulls, the strength in Shopify stock means that investors will take the long view on the market’s best growth names. To bears, however, it might signify that investors still haven’t fully reckoned with the overvaluation present not just in Shopify stock, but the market as a whole.
Among stocks with a market capitalization over $10 billion, Anthem (NYSE:ANTM) was the market’s biggest gainer on Wednesday. The next four winners show why that was. The second of our big stock charts, meanwhile, suggests ANTM stock could have more upside ahead:
- Relative to past trading, it’s not as if ANTM looks all that expensive. Resistance has held above $300 on multiple occasions, to be sure. But technically, there’s little reason why Anthem stock can’t again challenge those levels. Moving averages have been cleared, though one minor concern might be the stability of the 200-day at $275-$280 — which might suggest ‘true’ demand comes in closer to that price.
- The catalyst for the rally wasn’t just the big gain in the broad market. Rather, ANTM stock appears to have benefited from election results on Super Tuesday. Vermont Sen. Bernie Sanders came in second to former Vice President Joe Biden. Given that Sanders is pushing a single-payer “Medicare for All” plan, his candidacy was a clear threat to U.S. insurers. And so ANTM gained over 15% on Wednesday, as did Centene (NYSE:CNC). Humana (NYSE:HUM), whose chart looks similar, rose 14%, and Cigna (NYSE:CI) and UnitedHealth (NYSE:UNH) each jumped more than 10%.
- For ANTM, in particular, it does seem like a normalized market can drive more upside. Shares are reasonably valued at less than 12x forward earnings. Political risk has come down markedly after Tuesday’s results. If the second driver of investor fears — a spate of claims for coronavirus treatment — proves overblown, ANTM finally could break through resistance.
Like SHOP, GrubHub (NYSE:GRUB) has shown somewhat surprising strength, and seems to have found a bottom. The third of Thursday’s big stock charts suggests there’s still work to do, which makes GRUB a potentially interesting test case for this market:
- Trading since late October has established a bullish ascending triangle pattern. GrubHub has failed to clear resistance twice this year, but higher lows show the stock is building momentum. GRUB still has to clear short-term moving averages, but in the context of this market (and like SHOP, a still-steep valuation), the trend looks positive.
- The question, however, is whether GRUB is quite strong enough as a stock to keep rallying through the volatility. The debate over SHOP largely comes down to valuation. For GrubHub, competition from the likes of Uber (NYSE:UBER) and soon-to-be-public DoorDash is a key concern. That aside, there’s still the question as to how much, if any, profitability a food delivery company can deliver long-term. Both worries crushed GrubHub stock in October; it’s perhaps surprising to see the stock continue to rally in a “flight to safety” environment.
- And so GRUB represents an interesting test and maybe an interesting short target for market skeptics. If GRUB can get its proverbial feet back underneath it, the same should be true for growth stocks as a whole. But if even pandemic fears are still allowing those growth stocks to gain, maybe there’s more going on here, and more to come, than just a short-term sell-off.
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.