Another week, another win. That’s the third winning week in a row for the S&P 500, thanks to Friday’s 0.66% advance. The close at 2,907.41 wasn’t the best ever, but it puts the index within sight of the record high of 2,940.91 hit in September of last year.
Walt Disney (NYSE:DIS) led the way with its 11% gain, as investors celebrated the release of pricing details regarding its streaming service that will compete with Netflix (NASDAQ:NFLX). The service will only cost $6.99 per month, which handily beats even the lowest-cost option Netflix offers.
Netflix shares fell more than 4% on the same news, though that still wasn’t as bad as the near-5% setback Chevron (NYSE:CVX) suffered on Friday. The oil giant announced a bid to acquire Anadarko Petroleum (NYSE:APC) at a $33 billion price tag some investors feel may be too high.
Wells Fargo (WFC)
At first glance, the 3% tumble Wells Fargo shares took on Friday is uncomfortable, but not devastating. Stocks have survived worse.
Sometimes, though, there’s more to the story. This is one of those times. In this case, the fact that WFC stock tried to rally its way out of trouble on the final day of last week and then failed — miserably — at the first pitfall underscores how little support there is for this fragile name;
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• The shape of Friday’s bar is the key. The open was more or less even, but the intraday rally only had to approach the blue 20-day moving average line before being completely upended. The bears tipped their hand.
• Friday’s big volume behind the selloff is another red flag, but if you look closely, you’ll see that the bearish volume was slowly building all week. The sellers may have had Friday’s rout planned.
• Last week’s setback also largely confirms a head-and-shoulders pattern that has been taking shape since the beginning of 2017. The pattern roughly puts WFC stock on a path towards the a key floor around $43.40, plotted with a red dashed line on the weekly chart.
It’s a bit difficult to see through all the volatility, but Metlife shares have been working on a breakout. Last year was relatively disappointing, but not a terribly well-deserved headwind.
A major line in the sand has been drawn and verified as of Friday though, not because of what MET did, but because of what it wasn’t able to do. That failed effort IS the verification of where the big technical ceiling now lies, though there’s another, smaller one also coming into view.
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• The $46.28 level is the key, plotted in yellow on both stock charts. After bumping into that resistance four times since November, Friday’s fifth effort ultimately fizzled as well.
• Although not making any net progress, the higher low since December’s bottom is underscored by a rising Chaikin line that says there are more buyers than sellers here.
• Should the $46.28 level be hurdled, the next likely ceiling is $48.70, plotted with a red dashed line on both stock charts. That’s were Metlife shares peaked several times last year.
Hormel Foods (HRL)
The bulls have been trying to shake Hormel Foods out of a rut for weeks now, with each effort ultimately failing. Still, those bulls held the line, keeping HRL shares within striking distance of a renewal of last year’s rally.
As of Friday, though, the stock is dangerously close to breaking below a major support line and has broken below another technical floor. Even worse, the sellers haven’t been shy here.
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• The line in question is $40.97, plotted with a red dashed line on the daily chart. That’s where, as of the end of last week, Hormel has made a low for the third time since December.
• Although not yet below the $40.97 level, on Friday HRL stock did fall under the white 200-day moving average line.
• Zooming out to the weekly chart, we can see the rising support line that has tagged all the key lows going back to late-2017 is also close to being broken.
• The bearish volume bars are starting to steadily grow.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
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