Further downside will provide a very low risk entry opportunity. 

Shares of software giant Oracle suffered a major breakdown last Friday.  Following the stock’s first quarter earnings release Thursday afternoon ORCL opened the next session with a huge breakdown gap.  By the close the stock was off over 7% as selling pressure surged to its heaviest level in years.  This was as sharp reversal from the very bullish action earlier in the week.  Just last Wednesday ORCL closed at new all time highs. 

Oracle has continued to fade this week although downside momentum has begun to ease.  Despite this we expect shares to drift lower in the near term after leaving behind an ominous key downside reversal in the weekly chart.  For patient bulls a further decline will produce a very low risk entry opportunity.  As shares near $47.00 investors should be prepared to take action. 

Major support near the $47.00 to $46.00 area should be viewed as a low risk buy zone.  This key zone includes the Oracle’s initial post election peak near $47.00 as well as the powerful post earnings breakout gap left behind back in late June.  As ORCL reaches this area it will stretch the sell off from the 2017 highs to 12% and will likely enter oversold territory.  This is the formula for a bottom, at least a temporary version. 

At time of publication we are long ORCL in some managed accounts. 

SPY(S&P 500 Index)  +13.4%

IWM(Russell 2000 Index)  +6.9%

UUP(US Dollar Index)  –9.8%

TLT(US 20+ Year Treasury Bond Fund)  +7.5%

GLD(Gold Index)  +13.4%

USO(Crude Oil Index)  –13.6%

As highlighted earlier this month September happens to be the weakest month of the year for S&P 500 returns.  So far September has proven to be quite positive but the weakest part of the month is just now beginning.  A lot can happen over the next two weeks:

Hat tip Ryan Detrick

Continued weakness in the bond market has given the financial sector quite a boost as a new week begins.  Shares of JP Morgan are moving well after opening today’s session with an upside gap.  The largest of the money center banks is up over 1.3% and is setting up for a run into new 52 week high territory. 

JPM is trading at new September highs at mid day as it extends the rally off this month’s low to over 5%.  Earlier this month the stock dipped down to its 200 day moving average after major resistance near the $94.00 area capped the August high.  This was the third monthly peak in this zone since the March top.  The hold near the 200 day following the most recent pullback from the $94.00 area was very encouraging.  Now that shares have mounted a solid rebound from the 200 day layers of support are in place. 

In the near term we expect JPM to retest 2017 highs.  As this develops the stock is trading near a very low risk buy zone.  The first layer support runs from the initial September peak of $92.35 to last week’s high of $91.70.  JPM still has an important hurdle to clear but once the $95.00 level is convincingly taken out the stock will have room to run.  On the downside, a close back below $90.00 would indicate the heavy supply zone near the 2017 highs is still in control.  Until then JPM will remain on solid footing.

At time of publication we are long JPM in some managed accounts.   

Each candle represents a month.  Possibly a run to resistance at 60.   However, if it takes out 42 on a close, then I think an eventual 30 handle.

Texas Instruments has been moving steadily higher on heavy trade since today’s opening bell.  As the week comes to a close the stock is testing its 2017 highs as the rally off the August lows continues.  TXN is about to clear a very heavy resistance band and is setting up well for more upside.  A follow-through move next week could usher in a powerful fresh rally leg. 

After suffering an ugly downside reversal in early June TXN began a steep pullback.  By the end of the month the stock had taken out its March, April and May lows before reaching major support near its 200 day moving average.  By the time the $76.00 area was tested TXN was back in deeply oversold territory.  The stock formed a very solid base here and by the second week of July it was clear the first re test of the 200 day moving average since February of 2016 was a success.  The rebound that followed carried shares all the way back up to the 2017 highs but the heavy resistance in this area limited further upside. 

Today TXN is mounting another assault on the $84.00 area.  If this zone can be convincingly taken out the stock has plenty of room to run.  The stock has a solid support zone in place from the $84.00 to $83.00 area.  A close back below $81.00 would violate this week’s low indicating more range bound trade is ahead before a fresh rally leg can take hold.

At the time of publication we are long TXN in most managed accounts.

Harley-Davidson is moving well today.  The stock is up 2% as it extends an impressive rally off the September lows.  This bullish action is beginning to leave behind a major support zone near $46.00.  After an incredibly steep decline off the March peak HOG is setting up well for a meaningful recovery.

Back on July 18th HOG suffered its biggest downside gap open since October of 2015.  This earnings inspired flush drove the stock to nearly a 6% decline as selling pressure surged to its heaviest pace in years.  Despite this damaging collapse further loses were limited.  HOG managed a slight bounce but remained above the July 18th lows until earlier this month.  The stock pierced the $46.00 area on September 5th but quickly rebounded.  Since then HOG has been steadily climbing leaving behind what is now shaping up as a major double bottom.

Harley-Davidson is a low risk buy on weakness.  The stock has a solid support zone in place just below current levels.  It would take a close back below this week’s low of $46.80 to weaken this positive set up.  On the upside, a gap fill move up to $51.50 appears likely.  Also in this target zone is heavy resistance near the May/June lows. 

Also of note, HOG sports a sky high short interest ratio of 13.6.  This is an incredible amount of upside fuel. 

Earnings(Q3)are not due til October 17.

At time of publication we do not have a position in Harley-Davidson.

Union Pacific (UNP) is surging today. The largest-cap stock in the railroad sector is up over 1.6% as it extends an impressive rally off the late-July lows. At midday, shares were beginning to pierce the July highs while tracing out a seven-day winning streak. This powerful move has set UNP up for a run back to the 2017 highs.

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