Good news for CA, Inc. (NASDAQ:CA) shareholders was bad news for Broadcom (NASDAQ:AVGO) owners. The latter is looking to acquire the former, sending CA shares up a healthy 18.6%. The market is ultimately saying Broadcom is overpaying for the headache of integrating the two companies, however, as AVGO shares ended Thursday’s action in the red to the tune of 13.7%.
On balance though, Broadcom was the exception to the norm rather than the norm yesterday. Despite the overhang of trade war chatter, stocks continued their bullish romp. The S&P 500’s 0.88% gain carried the index to within sight of January’s record high of 2872.87, even if that level is not quite in reach yet.
The bulls are making their run at a time of year that’s not known for bullishness, however. Wise traders will remain focused the best trading setups, which for Friday include TJX Companies (NYSE:TJX), Nordstrom (NYSE:JWN) and Kansas City Southern (NYSE:KSU).
TJX Companies (TJX)
There has been a broad revival from most retailers that survived the retail apocalypse. Whether discounter TJX Companies was immune to that apocalypse or just better-positioned to capitalize on the recovery is a matter up for debate.
Either way, TJX shares have rallied a little too far, too fast, and this week have started to struggle under the weight of that big move. A pullback is one bad day away.
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• The “clincher” clue is the fact that we saw so much volume behind Tuesday’s and Thursday’s pullbacks, but saw very little volume behind Monday’s and Wednesday’s gains.
• The make-or-break line is, more or less, the $94 area, where TJX found support a couple of times since early June.
• The monthly chart shows an overbought condition based on RSI… something rarely seen in that timeframe from a stock like TJX Companies (and certainly rarely seen for long).
Not all retailers are toying with a breakdown though. Higher-end player Nordstrom, Inc. is toying with a breakout, testing the waters of a bullish thrust by virtue of this month’s tip-toe to new multi-month highs.
As you’ll see on the daily chart though, any bullishness going forward is still apt to be choppy and inconsistent, featuring two steps forward and one step back.
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• The monthly chart’s bullish undertow has been building slowly and steadily for a while now, but that gain hasn’t been so hot that it’s tempting profit-takers.
• Though the daily chart is erratic (and will likely remain so going forward), most of the key moving averages have served as technical support in the recent past. Look for those lows as buy-in points.
• Note that the $59.40 area could mark a ceiling, even if only a temporary one. That’s where the stock topped in 2016, and that’s also where a key Fibonacci retracement presently lies.
Kansas City Southern (KSU)
Finally, back on July 3 we took a bearish look at Kansas City Southern, noting how the railroad stock was putting pressure on a support line at $104.52. KSU never ended up breaking below that floor though, largely negating the setup.
If you took it off your watchlist, put it back on. After a brief bout of bullishness, shares are once again toying with a breakdown. And this time, the bearish undertow is even better formed.
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• The 20-day moving average lines has now crossed below the 200-day moving average, suggesting the selling effort has since gained even more momentum.
• On the monthly chart we’re just pennies away from a bearish MACD cross … one of the first in over a year.
• Also on the monthly chart we’ve been watching the Chaikin line fall since mid-2017, even when the stock itself want. This tells us the sellers have been planning to get out — and that the buyers have been steering clear — for months now. It’s unlikely they’ll change their mind at this point.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
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