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Argus Technical Analysis: Further to Run?

Joanna Kong
·Yahoo Finance Premium
·4 mins read

Despite our technical call for a short-term pullback, we still believe the market has further to run in 2020. With the S&P 500 (SPY) climbing since the first part of October, the index is getting close to the top of our initial target zone of 3,300 to 3,400. So we will elaborate a bit on some potential “500” technical targets. But remember, targets should never be set in stone; they are just an educated guess.

Based on the size of the cup-with-handle (C&H) or “V” bottom from late 2018 and into 2019, the size of the bullish reversal formation is 600 S&P points. The peak of the pattern (2,950) minus the bottom (2,350) gives us this measure. An initial measured move, based on a 62% to 79% extension, gives us a targeted range of 3,322 to 3,424. A typical 100% extension leads to a potential top at 3,545 or another 5% to the upside. If things really get exciting, the “500” could see an extension of 127% to 162%, creating an objective of 3,746 to 3,922. This range equates to another 11% to 16% of upside.

Looking at this from another technical angle (Elliott Wave), it’s likely that we are in Primary Wave 5 of this bull market (or the last major wave higher). Primary Wave 5 started at the end of 2018 -- and based on the current grind-higher price action, most likely we are in Major Wave 3 with Waves 4 and 5 still to come. Based on the size of Primary Wave 1, which started in March 2009 and ended in April 2011, we can see Primary Wave 5 extend to the 3,600 to 3,700 region. Yes, bull markets consist of 5 waves, implying the above targets could be followed by a nasty bear market.

AmerisourceBergen (ABC)

Whitestown - Circa May 2019: AmerisourceBergen Pharmaceutical Distribution Center. Walgreens (WBA) owns a 26 percent stake in AmerisourceBergen II
Whitestown - Circa May 2019: AmerisourceBergen Pharmaceutical Distribution Center. Walgreens (WBA) owns a 26 percent stake in AmerisourceBergen II

AmerisourceBergen is one of the nation's largest pharmaceutical distributors. It distributes brand-name and generic drugs, OTC healthcare products, and home healthcare supplies to healthcare providers in the U.S. These include acute-care hospitals, and, independent and chain retail pharmacies, mail-order facilities, and physicians. ABC recently broke out of a seven-month price consolidation on slightly above-average volume. The range of the consolidation was between $80 and $95, so ABC could see a measured move up to the $110 area.

Going back to January 2018, when the stock peaked at $106, it’s possible ABC is working on a very large rounded bottom. To complete this larger pattern, the shares need to break strongly above the $106 area. That could have implications for a longer-term move well above the $110 zone. We would put a stop-loss just under chart support and the 50-day average at $88. We would take profits at $110.

Harsco (HSC)

Harsco is a provider of environmental solutions and services as well as engineered products. Its three divisions are Harsco Environmental, Harsco Clean Earth, and Harsco Rail. HSC has been hit hard since peaking at $30 in September 2018. About a week ago, the shares had fallen down near the $13 level. Back in 2008, the stock was in the $60’s. Obviously, this is a short-term and risky technical turnaround play. In late January, following disappointing quarterly results, HSC plunged for two days on massive volume.

This appears to be a capitulation to the downside. The shares have stabilized since, with downside momentum subsiding. Because the recent decline was so sharp, there is little resistance immediately overhead. If the shares can break back above the $16.50 level, the next resistance is an unfilled gap and the 50-day average near $19. We would put a stop-loss just under chart support at $13. We would take profits in the $18.50/$19 area.

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