Yesterday was yet another indecisive day that essentially ended where it started. The S&P 500 slipped 0.11% on Tuesday, content to linger where it’s been for the past week and a half.
General Electric (NYSE:GE) proved to be the biggest drag. Shares of the beleaguered industrial giant fell 4.7% after the company cautioned its industrial free cash flow this year wouldn’t be as strong as investors were expecting. Free cash flow may be the one thing investors need to see improve more than any other.
Aurora Cannabis (NYSE:ACB) jumped 12.2% after Cowen Equity Research’s enthusiastic coverage was unveiled, while China’s electric vehicle maker Nio (NYSE:NIO) saw its stock gain 3.9% in front of its post-close earnings report. But, neither are key index components. In fact, Nio shares fell more than 14% in Tuesday’s after-hours action.
As Wednesday’s trading gets going, the stocks charts of Alaska Air Group (NYSE:ALK), Henry Schein (NASDAQ:HSIC) and PulteGroup (NYSE:PHM) are of the most interest. It looks as if they’re not being bogged down by the broad market’s overall lethargy, being allowed to set up some explosive movement.
PulteGroup was down more than a little bit yesterday, but one has to take a step back to put it on context. Tuesday’s weakness was more of the same traversing of an ever-narrowing trading range that’s quickly pushing PHM to an inflection point.
In fact, either the bulls or the bears are going to have to make a decision within the next few days. It could still go either way, but whatever’s in store should be a big move.
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• The converging wedge pattern is plotted with yellow dashed lines on both stock charts. There’s very little room left between these support and resistance levels.
• Also in play is the convergence of the purple 50-day moving average line and the white 200-day line. If the former moves above the latter, that’s a buy signal in and of itself.
• Though the momentum is technically bullish, there’s a distinct lack of volume behind the gains thus far. The rally needs more participation if it’s going to last.
Henry Schein (HSIC)
Were it not already in more than a little technical trouble, the daily and weekly stocks charts of medical supply company Henry Schein wouldn’t be of particular interest. But, with a headwind in place and a major support level in sight, it’s worth a closer look. One or two more bad days could put some more serious selling into motion.
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• The big floor in question is the horizontal resistance around $57.64, plotted with a white dashed line on both stock charts. That support has kept shares propped up with each key low since late December.
• But, HSIC shares continue to test that level as support in the shadow of the purple 50-day moving average line’s cross below the white 200-day moving average line. This so-called “death cross” often precedes a sizeable pullback.
• Zooming out to the weekly chart of Henry Schein, was can see that the $57.64 area has not only been a floor before, we can see an up-and-down pattern that may not have fully played out yet. The RSI line needs to be much closer to 30 before the selling has fully exhausted.
Alaska Air Group (ALK)
Finally, with nothing more than a quick glance it looks like Alaska Air Group shares are in trouble. And, maybe they are.
But, this is a scare we’ve seen many, many times from ALK before, just within the past few weeks. All of them abruptly ended with a sharp bounceback, and the early indications are that this one will end with the same result.
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• While sharply lower on Tuesday to top off a week-long rout, yesterday’s low and close also more or less lines up with the big lows hit five different times now since April of last year.
• Although repeated tests of a technical floor will eventually break it, Tuesday’s volume surge actually flags something of a mini-capitulation.
• On the other hand, a string of failed breakout attempts can discourage future attempts. Note that all the key moving average lines are now sloped downward, saying the undertow is leaning in a bearish direction.
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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