Archive for the ‘Chart of the Day’ Category

Occidental Begins A Healthy Pullback

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Shares of Occidental mounted a huge rally after basing just below its 200 day moving average in March.  Aided by a powerful breakout following its May 8th earnings report the stock extended its gain off the March bottom to 40%.  OXY managed to put in a new monthly high in June but it was clear upside momentum had evaporated.  Over the last three weeks the stock has been drifting lower while working off an extremely overbought MACD(moving average convergence/divergence indicator).  On Monday OXY closed below its 50 day moving average for the first time since the April 9th breakout.   A healthy pullback appears to be underway.  When complete a very low risk entry opportunity will develop for patient bulls.

OXY left behind a major support zone following its huge May 9th breakout.  This key area includes the stock’s January and April highs, the 2016 high and the 5/9 upside gap.  Also near this level is the 1/3 retracement point of the entire 2018 range.  This very solid support zone runs from $79.00 to $78.00.  A dip down to this ares will provide a low risk entry opportunity.  On the downside, a close back below $75.90 would violate the May lows sending a clear warning sign that a more prolonged bottoming process is ahead.

At time of publication we do not have a position in OXY.

 

Three On The Radar Screen

Pullbacks create opportunity.  As the new week begins stocks are broadly weaker.  Here’s a trio we believe are beginning to look attractive. 

Home Depot(HD):

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Home Depot has had a great run since basing near its 200 day moving average in early April.  At last week’s high the stock was up 17% from the April 2nd bottom.  HD began to show signs of exhaustion two weeks ago before suffering an ugly key downside reversal on Friday.  The stock is weak again today as a healthy pullback begins.  A dip down to initial support near the May high($191.65)would provide a low risk entry opportunity for patient investors. 

Walgreens Boots Alliance(WBA)

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WBA exploded off its major base following its addition to the Dow Jones Industrial Average last week.  The stock has been consolidating over the last three days, a process we expect to continue.  WBA has a very solid support zone in place near the multi-week May highs.  A dip down to this zone, which runs from $66.30-$65.80, would provide a entry opportunity for patient bulls.

Hp Inc.(HPQ):

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HPQ began this month with an earnings inspired trendline breakout.  After a seven day winning streak, which stretched the rally off the May lows to 15%, the stock began to lose momentum.  HPQ has remained in a narrow range over the last two weeks.  Just below this healthy consolidation is a solid support area near the May peak($23.10).  With selling pressure rather light of late, we believe this zone represents a low risk entry opportunity. 

At time of publication we are long WBA and HPQ in some managed accounts.

 

SP500

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Ten Year Yield Watch

The Ten Year Yield Index(TNX–X)has reached a crucial level.  During the first quarter of this year the index broke through the upper band of a bearish channel that has been in place for thirty years.  This quarter the index is testing its 50 quarter moving average.  Since December of 1987 the 50Q mav has provided heavy resistance:

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The Ten Year Yield will need to close above 2.913% to clear the 50Q mav for the first time since September of 1985.  We have one week to go in the second quarter.  A major bottom appears to be in place near 1.35%.  A massive shift in interest rates may be just beginning, one that could last for many years. 

Upside Fuel

Short covering, the unwinding of bearish bets, is providing quite a boost to the S&P 500 Index:

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Hat tip Callum Thomas/@seeitmarket

New Highs For LEI(Leading Economic Indicators)

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The LEI is up 6.1% year-to-date.  A sub zero reading, which last occurred in mid 2006, is a clear recession warning sign.  We are nowhere near that type of reading.  

Hat tip Ryan Detrick

 

Halliburton Option Players Are Expecting A Rebound

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Shares of Halliburton began a steep decline in late May.  After a damaging breakdown on the 25th the stock had left behind layers of supply and was entering a fresh down leg.  One week ago HAL blew through major support near its 200 day moving average.  This key long term indicator had previously held the February, March and April lows.  The sell off continued this week pushing shares back down to the 2018 lows.  Today HAL, along with the bulk of the energy sector, managed a strong bounce but will it carry with it enough momentum to move back above the 200 day moving average?  Option traders are positioning themselves that way.  Here’s some detail from our option expert Bob von Halle:

There has been significant buy side interest in HAL Aug 50 calls all week long….perhaps in anticipation of a large move higher in oil prices post the OPEC meeting today. On Tuesday, over 20,000 contracts traded, on Wednesday over 8,000 traded, on Thursday over 7,000 traded and today 4,000 crossed the tape. The open interest in total in that strike is now over 38,000 contracts and is by far the largest in the name.

HAL closed today at $46.25 which is down $1.10 from its intra-day peak of $47.35. The August 50 calls closed at $.75 bid, down from a peak trade today of $1.05. What is interesting to note is this pull back in HAL over the course of the afternoon at the same time that WTI Oil Futures closed at the peak of the day at $69.375, up an astounding $3.85 (almost 6%)….all in reaction a more modest than expected increase in OPEC production. I trade oil futures on occasion, and my experience tells me when you see such a dramatic move in one day based on modest “news” it usually reflects substantial short covering, as way way too many people were obviously on the one side of the boat anticipating a drop in oil prices based on the potential for an increase in supply. I would not be surprised to see a significant retracement lower early next week.
Going to be watching these HAL Aug 50 calls very closely should that occur and look to establish a position on any further weakness.
At time of publication we are long HAL in some managed accounts.

Crypto

Bitcoin futures continue to take a beating.  Support is at 6K

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FANG

FANG stocks.  At or near all time highs.

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Disney Retreats, Returns to Support

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Last week shares of Disney exploded to the upside with the help of a massive wave of news driven(merger/takeover)buying.  DIS closed the week with a 4.75% gain as it extended the powerful rebound off the late May lows to 10%.  This week the stock is backing off on light trade.  At today’s low DIS is testing the top band of a very solid support zone.  This area, which runs from the March high($106.00)down to the pre-merger news high(6/12)near $104.00, should be viewed as a low risk buy zone.  We expect shares to stabilize here.  On the downside a close back below the $103.00 level would indicate a much more drawn out pullback is on the way. 

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

Disney’s next earnings report is due Aug. 7(Q3).

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