Believe it or not, not every stock was trashed on Monday. Campbell Soup (NYSE:CPB) managed a 9% advance on the heels or reports that rival Kraft Heinz (NASDAQ:KHC) was planning to make an acquisition offer.
But yes, most stocks did run into trouble, with growing concern that the threat of a trade war will become a reality. Harley-Davidson (NYSE:HOG) — one of the primary targets of new tariffs proposed by goods imported into the UK — tumbled to the tune of 9%. Meanwhile, Netflix (NASDAQ:NFLX) suffered a 6% setback on renewed concerns that it’s spending too much on content.
Most stocks, however, dished out a little less drama, and begin wiggling their way into a more predictable trading pattern. The top prospects among those less volatile names are Bank of America (NYSE:BAC), American Express (NYSE:AXP) and Marsh & McLennan (NYSE:MMC).
Bank of America (BAC)
It had more to do with marketwide weakness than company-specific trouble, but the fact that Bank of America shares were already in trouble heading into Monday’s action is a vulnerability that can’t be ignored.
Right or wrong, this weakness has been brewing for a while, and was finally unleashed in earnest.
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• It looked like the 200-day moving average line (green) was going to hold up as a last-ditch support level, but it snapped today. So did a horizontal floor at $28.86.
• Monday’s low of $28.28 is in line with the early May low, and could be a floor; we won’t know until at least today, if not later.
• If that floor around $28.28 breaks down, the nearest technical floor isn’t until $21.76, where BAC stock formed a base early last year from which we saw a strong move to March’s high. It would take a pretty significant setback to test that level as a floor, but nothing can ever be entirely ruled out.
American Express (AXP)
The noteworthy (even if not earth-shattering) gain from American Express was prompted by news. In short, the U.S. Supreme Court tossed out a case that claimed the credit card company was unfairly preventing merchants from steering customers to other card companies.
The matter isn’t a terribly big deal, but the response in the stock price could have kickstarted a swing trade by the formation of a very specific pattern.
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• That is, Monday’s open was below Friday’s low, and Monday’s close was above Friday’s high. Monday’s bar completely engulfed Friday’s bar, with a move in the opposite direction … a strong sign of a major change of heart from traders.
• The strength of the engulfing bar is made even stronger by the kiss of the 200-day moving average line, followed by a decisive push up and off of it.
• Still, some measured progress all the way above the 50-day moving average line would set up a healthier, more reliable advance from here.
Marsh & McLennan (MMC)
Last but not least, shares of Marsh & McLennan Companies look like they were already stuck in a sideways range, and since April have been pressed lower by a falling resistance line; it’s all framed by the red dashed lines on the daily chart.
That’s not necessarily a bad thing, however. After months and months of sideways consolidation, the tension is building for a breakout thrust.
Which direction? That remains to be seen.
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• The fact that MMC stock managed to hammer out a gain on Monday when other stock charts were taking a beating is noteworthy. So is the fact that Marsh & McLennan stock is testing the 200-day moving average line as a technical ceiling, and just moved back above the 50-day line.
• The “checkpoint” target here, if MMC breaks above the falling resistance line, is still the recent horizontal ceiling at $85.56. If Marsh & McLennan shares break above $85.56, there’s little that will be able to stop it.
• Conversely, if the uptrend doesn’t take hold, a break below the recent support at $79.42 is apt to start a chain reaction of selling. In that event, Fibonacci retracement lines at $71 and $62 become plausible targets.
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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