Shares of Charles Schwab Corp have been on an absolute tear over the last two weeks. Today $SCHW is working on its 11th straight gain as it extends the rebound off the October 26th low to 16%. Volume pacing this advance has eased of late but the initial leg of this move showed a massive accumulation wave, one not seen since immediately after the November 2016 election. Certainly the rise in interest rates since 10/29 have provided a catalyst but overall the rate move has been fairly subdued by comparison.
Back on Oct. 15th $SCHW fell to fresh 2018 lows following a rather solid earnings report. This breakdown type move took out the 2018 low set back in February. The stock began a steep slide two days later and over the next nine sessions it fell deeply into oversold territory. By the time the big institutional buyers stepped up to the plate on October 25th the stock had extended its post earnings drop to 14% and was off 30% from the 2018 peak.
The current rebound has been very impressive. $SCHW is now bumping up against a very significant wall of supply. The $49.00 area provided major support following the ugly sell off from the mid May peak. The July, August and September lows held this zone. Once the $49.00 area was convincingly taken out on Oct. 11 the stock was extremely vulnerable. Also adding heft to this zone is a declining 50 day moving average.
We expect a period of back and fill to begin soon. A consolidation accompanied by a slight pullback before $50.00 is cleared would provide a low risk entry opportunity for patient bulls. Initial support is in place near last week’s high($47.00). Ideally we would prefer a deeper pullback. We will be looking to add on weakness.
At time of publication we are long $SCHW in most managed accounts.