The market continues its “melt” higher as the S&P 500 and other broad indices inched higher again on Monday, followed by further gains on Tuesday.
So far, with more than half of the month gone, stocks are bucking the seasonally weak month of September. The current rally has been driven in some ways by oversold conditions drawing buyers into the market, but some very popular names are now improving their technical outlook.
Today’s Three Big Stock Charts reviews the technical pictures of Costco Wholesale Corporation (NASDAQ:COST), Goldman Sachs Group Inc. (NYSE:GS) and TripAdvisor Inc. (NASDAQ:TRIP), as each of these companies are at potential inflection points and technical tests that will likely result in their next 5% to 10% moves.
Costco Wholesale Corporation (COST)
The comeback of the brick-and-mortar retailers continues to gain ground as this group of long-hated stocks climbs into stronger technical trends. The opportunities among the group are still in the early stages as companies like Costco are finally bouncing from what could be long-term tradable bottoms.
- Costco stock bounced from long-term technical support at its 20-month moving average. The stock last challenged this line of demarcation between a bull and bear market trend in November of 2016 ahead of a rally that took the stock from $145 to $180 over the following six months.
- The recent double bottom at $150 forms one of the strongest technically bullish patterns according to historical testing. This bottom has served to strengthen momentum in the stock that now has the 50-day moving average transitioning into an intermediate-term bullish outlook.
- Costco shares are currently facing a test of the 200-day moving average. A break above this trendline is going to accelerate the upside momentum of the shares as the technical crowd begins to migrate back into Costco shares.
Goldman Sachs Group Inc. (GS)
Financial stocks have turned against the bears and are now forming stronger trends. That said, companies like Goldman Sachs are still facing technical tests before they are going to make their next significant move higher. As of this morning, ahead of the FOMC, Goldman Sachs shares are facing a technical test that may allow the benchmark bank to move back into an intermediate-term bullish trend.
- Just weeks ago, we were writing about the critical tests that Goldman Sachs and other financial stocks were facing as the sector had turned to a relative strength laggard against the rest of the market. Over the last two weeks, the leadership has shifted as Goldman and other banks are now leading over the last month.
- Goldman Sachs shares have spent the last five months bouncing off of support from the stock’s 10-month moving average (chart below). This longer-term trendline is beginning to shift into a neutral outlook as it flattens. Continued breaks below the long-standing support will continue to pressure shares.
- Goldman Sachs shares are facing a technical battle at $230. This price level represents the confluence of the following…
- The current site of the stock’s 200-day moving average which is also threatening to transition into a bearish outlook.
- The top Bollinger Band for Goldman Sachs stock. We saw reversals in June, July and August when Goldman Sachs’ stock hit this band.
- Chart resistance at $230 since April, which is clear from the year-to-date chart above.
- A rejection at $230 is likely to cause Goldman shares to tumble back to the $215 price.
Tripadvisor Inc. (TRIP)
Tripadvisor shares have been lagging the market through 2017 as the stock has lost as much as 23% year-to-date. Recently though, this stock bounced from what may be a long-term bottom and the stock is gaining momentum. A technical shift is in the works on this once relative strength leader that is putting the stock into comeback mode.
- In August, Tripadvisor shares flashed an intermediate-term bullish signal as the stock’s 50-day moving average shifted into a bullish trend. The last time this happened, shares rallied from $60 to $70 in January 2016.
- After extending themselves into a technically overbought situation, Tripadvisor shares have pulled back to support at their 200-day moving average. An increase in the daily volume suggests that the stock is gaining support from technical traders.
- Chart support and the improving trend in the 200-day should act as support over the short-term and provide traders with the necessary bullish catalyst for the stock to continue its ascent back above $50.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
