Monday’s dead-cat bounce wasn’t meant to last. Instead, with recession worries renewed by another inversion of the two-year and ten-year yield curve, the S&P 500 fell 0.32% on Tuesday.
Altria Group (NYSE:MO) led the charge, falling another 4% as investors protested its reported plans to merge with rival Philip Morris (NYSE:PM). To that end, Philip Morris shares fell nearly 8%, albeit on lower volume, on the unpopularity of the idea among its shareholders.
Yet, there were some winners. Costco (NASDAQ:COST) was one of them, up 5% after a very well-received opening of its first store in China.
As for names worth a look headed into the midpoint of the trading week though, take a look at the stock charts of eBay (NASDAQ:EBAY), UnitedHealth Group (NYSE:UNH) and Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B). Here’s what’s most noteworthy.
UnitedHealth Group (UNH)
It has more to do with the broad market and the industry itself than it does with the company. Nevertheless, UnitedHealth Group shares — already fighting a losing battle — started to break down in a big way last week. Yesterday’s 3.1% tumble underscored how easily UNH stock could be up-ended.
While the stage is perhaps set for a short-term dead cat bounce, even a modest recovery effort wouldn’t be enough to undo the bulk of the damage that has been done just since the middle of last month.
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Chief among the technical problems here is a break back under what had been a support level tagging most of the key low since late last year, plotted in red. April’s dip was an exception.
- Also note that the convergence of all the key moving average lines in February and March has since turned into a divergence … a bearish one. The blue 20-day and purple 50-day moving average lines have since turned into technical resistance as well (highlighted).
- It’s a bit difficult to see in detail, but many of the daily selloffs since the middle of July have been on high volume. That bearish volume has been persistently above average the past few days.
In the middle of last month, eBay was put under the trading microscope. After it punched through a technical ceiling just under $39 in June, a couple of very rough days were testing that level again as resistance.
It ended up surviving, against the odds. But, that reprieve may have only been temporary. The bears took another shot early this month, and although EBAY stock bounced off the former ceiling near $39, the bears started to take another shot on Friday. The outlook is not encouraging for a couple of different reasons.
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Since the last look, the gray 100-day moving average line has stepped up as a support level, although it has yet to spark a clear rebound.
- It’s only a mild concern at this point, but notice how the “down” volume bars since the middle of last week are starting to grow taller, and taller than the green “up” volume bars.
- If the support around $39 should fail, two potential landing spots are already clear. One of them is the white 200-day moving average line, currently at $35.66, and the other is the floor around $35.40, where eBay found support several times earlier in the year.
Berkshire Hathaway (BRK.B)
Finally, it’s not a name that’s often analyzed from a charting or technical perspective. But, if Berkshire Hathaway is dropping technical hints, then it’s dropping technical hints.
And, that is what it’s doing here. Although they’re unsurprisingly subtle given the income-oriented nature of Buffett’s portfolio, they’re there, and they mean something. Indeed, given that Berkshire is a name preferred by the non-trader types, there’s an argument to be made that the chart’s shape tells us more about the changing viewpoint of the average investor than charts of more actively traded names. In this case, a big red flag is starting to wave.
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It’s clear on both stock charts, but the perspective needed to fully appreciate the risk is more evident on the weekly chart. That is, BRK.B stock has already logged a string of lower highs, and is testing a major floor right around $198.
- It would be easy to miss in the entanglement, but all four key moving average lines are now sloped downward. It’s a subtle clue that the momentum has taken a turn for the worst in all timeframes.
- Berkshire Hathaway will most likely move in the same direction as the broad market, and if that’s lower, the next likely landing point is the line that connects the key lows from last year, plotted in yellow, just under $190.
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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