As we noted in our Big Stock Charts feature last week, from the beginning of 2015 through Feb. 21 of this year, the S&P 500 moved more than 2.8% in a single session only fourteen times in more than five years. As of last Wednesday, it had done so six times in eight trading days.
The figure now is nine out of twelve — and the index may see another big move on Wednesday. Overnight futures are down more than 2%. The 10-year Treasury yield is down to 0.68%.
Bond markets haven’t seen those yields ever. The equity market hasn’t suffered from this kind of volatility since the financial crisis and it appears for now that stabilization isn’t yet on the way. Investors simply are holding on tight at this point.
Wednesday’s big stock charts focus on three names to which investors might look for ballast in this turbulent market. These are three of the biggest and most widely stocks on U.S. exchanges. None has escaped the broader sell-off. But, interestingly, all three charts do show some signs of optimism. In this market, investors will take what they can get.
The first of Wednesday’s big stock charts is far from definitive. But it does suggest that Microsoft (NASDAQ:MSFT) is at an inflection point:
- Right now, it seems like MSFT stock is headed either above $170 or back to $135, and potentially in a hurry. The optimistic reading suggests that support has held, setting up a potentially bullish reversal out of a narrowing declining wedge. Even the worst of trades on Monday left the stock nicely clear of the 200-day moving average. Bear in mind that the stock still is up 2% so far this year. The pullback from last month’s highs is disappointing, but this chart doesn’t seem to suggest an imminent collapse.
- There is one bearish pattern worth noting, however. MSFT created an inverted cup-and-handle when its rebound faded last week. And if shares turn south tomorrow, another, narrower, such pattern would be established. The move would test the 200DMA around $148; if that fails, Microsoft stock likely heads back to its 2019 base around $135.
- Of course, market movement probably determines in which direction the stock heads. Microsoft doesn’t have an earnings report until late April. It doesn’t have a disproportionate exposure to the coronavirus or to broader economic fears. Even before the recent volatility, the argument over the stock largely came down to valuation. And so it’s not surprising that the stock is going to reflect just how much investors are willing to pay for one of the world’s best companies.
For Visa (NYSE:V) the debate mostly comes down to valuation, although the stock does have a larger exposure to cyclical factors. The second of our big stock charts suggests that at least some investors see V stock as cheap enough:
- Visa stock returned to 2018 support and bounced nicely. That comes after the stock neared a similar level in late February, and that time it also rallied sharply. Like MSFT, negative trading on Wednesday is a risk, as it would suggest an inverted cup-and-handle pattern while also representing a failed test of the 200-day moving average. But, at the least, we do have evidence that investors are happy to pay less than $180 per share for Visa stock.
- Unsurprisingly, the Visa chart doesn’t look all that much different from those of other mega-caps. This has been a sell-off that has knocked down even the most quality names. Trading actually looks like that of Coca-Cola (NYSE:KO), a very different company.
In fact, the V chart looks like that of the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). One key difference is that the S&P 500 has breached support and sits well below moving averages. But if the likes of V and KO can find their own support, that should be good news for the market as a whole.
China Mobile (CHL)
The hope for the market at this point is that the worst is over. The third of Wednesday’s big stock charts suggests that might be true for China Mobile (NYSE:CHL):
- CHL stock has found support. And that comes after a decline that follows a textbook head-and-shoulders pattern. That sell-off should have played out.
- Certainly, buying any Chinese name at this point in the cycle seems insanely risky. But as we’ve noted before, Chinese stocks have not performed that badly in recent weeks. The iShares MSCI China ETF (NASDAQ:MCHI) actually has rallied from late January lows. Like its American counterparts AT&T (NYSE:T) and Verizon (NYSE:VZ), China Mobile should have some level of defensiveness given the priority customers will give their mobile phones. That’s not to say that CHL stock is cheap, but it has certainly underperformed other riskier China plays.
- Meanwhile, the rally off similar levels in late November came amid rising fundamental optimism. Shares got the so-called “Barron’s bounce” in December. Investors are getting a second chance at CHL at roughly the same price. The question is if they will take it.
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.