Traders came back from the weekend in the same bullish mood they got the weekend started with … almost. Friday’s 3.43% gain from the S&P 500 was a tough act to follow, but Monday’s 0.7% advance was respectable in its own right.
Even more impressive is that the market was able to do it without the help of Apple (NASDAQ:AAPL), and without much help from Facebook (NASDAQ:FB). The consumer-tech giant’s shares balked again as investors continue to wonder if the company’s glory days are behind it. Meanwhile, Facebook shares essentially broke even, with traders unable to shrug off doubts about a bright future for the social networking giant.
The heavy lifting was done by, amazingly enough, General Electric (NYSE:GE). GE shares gained another 6.3% on the heels of news that it may be close to selling its aircraft-leasing business. Investors are also increasingly believing that Larry Culp may be just the CEO the company needs to dig itself out of trouble.
The proverbial dust is settling, with most stocks starting to do their own thing rather than fall in line with the market’s wild moves. To that end, stock charts of Microsoft (NASDAQ:MSFT), Medtronic (NYSE:MDT) and Intercontinental Exchange (NYSE:ICE) are of the most interest after Monday’s action sets up the beginning of Tuesday’s trading.
Last week, Medtronic was named something of a problem child, having slipped back under its critical 200-day moving average line for a second time in just a few weeks after several bearish crosses of moving average lines were put on the books. Though it wasn’t a straight-line move, Monday’s 6.5% setback is the end result of that red flag.
The good news is, the sheer strength of the selling may have set up a nice rebound move.
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• Though a rough ride, Monday’s meltdown took shape on huge volume. This high-volume flushout is often seen at major bottoms.
• The good news is, the steep dive was so large and rapid, it took the weekly chart into an oversold condition. It also dragged MDT shares within striking distance of a major support line that has tagged the major lows going back to early 2017.
• Though ripe for a rebound, this is a setup that requires a couple of bullish days to confirm the bulls are willing to buy (in earnest) on this dip.
Just because a stock didn’t keep up with the broad market’s rally on one particular day doesn’t necessarily mean that stock is doomed. But, when that stock is a well-loved Microsoft, it certainly raises concerns.
Bolstering those concerns is the hesitation buyers demonstrated when the stock approached a couple of crucial moving average lines.
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• Yes, MSFT shares are fighting to bounce back from late-December lows, as most stocks are. But, Monday’s brush of the blue 20-day moving average line as well as the near-brush of the white 200-day moving average line sent the stock to end the day nearer its low than its high.
• Underscoring the bullish case is the fact that trading under the 200-day line is a big deal. Microsoft hasn’t been below that level since the middle of 2016.
• Quietly, the biggest red flag of all is the fact that Friday’s and Monday’s volume was anemic. Traders aren’t firm believers.
Intercontinental Exchange (ICE)
Finally, had Nasdaq (NASDAQ:NDAQ) not also fallen so much on the heels of news that Wall Street firms were planning to create a competitor to established exchanges, than the similar setback suffered by shares of Intercontinental Exchange — which owns the NYSE — would have been dismissible. But, that announced paired with the already-struggling chart’s latest situation may well mean shares are at their tipping point.
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• The big red flag here is how ICE shares are getting comfortable below their 200-day moving average line, plotted in white on both stock charts.
• Though the stock has been below this level of late, the $72 area is the current line in the sand. Should shares break below that floor, there’s little left to keep the stock propped up.
• Note that we’re still seeing a great deal of bearish volume on days Intercontinental Exchange loses ground, while the rare bullish days tend to be on light volume.
As of this writing, James Brumley held a long position in Medtronic. You can follow him on Twitter, at @jbrumley.
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