The market started yesterday’s action in the hole, and was content to end it there, essentially where it started. The S&P 500 ended the day down 0.67%, with trade tensions still weighing on investors’ confidence.
Qualcomm (NASDAQ:QCOM) led the way lower, falling almost 6% on the heels of news that the ban on deals with China’s tech company Huawai would hit it particularly hard. Broadcom (NASDAQ:AVGO) fell almost as much for the same reason.
None are great prospects headed into Tuesday’s session, however. Rather, it’s the stock charts of DISH Network (NASDAQ:DISH), WellCare Health Plans (NYSE:WCG) and Synopsys (NASDAQ:SNPS) worth closer looks.
Sometimes it takes one last big, high-volume selloff called a capitulation to get a new uptrend started. Other times, the opposite applies. It takes what looks to be a heating up of an already impressive rally to kickstart an overdue pullback.
That appears to be what’s materialized for Synopsys over the course of the past few days. For the better part of last week, it looked like it could do no wrong. As of yesterday though, it’s breaking down key technical support in a rather decisive fashion.
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- Monday’s close below the purple 50-day moving average line is a red flag, but made even more alarming by the fact that the stock jumped to new 52-week highs on a volume surge on Thursday.
- Zooming out to a weekly chart we get a feel for just how overextended the rebound from early in the year was. Up more than 50% for the four-month stretch, profit-takers are getting antsy.
DISH Network (DISH)
A couple of weeks back, DISH Network moved onto traders’ radars as a bullish candidate thanks to its so-called ‘golden cross,’ where the 50-day moving average line moves back above the 200-day moving average. Shares ended up bumping into an established ceiling around $35.55 though, setting the stage for what ended up being a sizeable intraday pullback on Monday.
The nature of that stumble and what happened in the middle of yesterday’s action, however, sets the stage for not just more bullishness, but the breakout thrust that couldn’t get going in earnest a month ago.
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- The sheer height and shape (and placement) of Monday’s bar is the key. All it took was a kiss of the gray 100-day moving average line to chop the intraday loss in half.
- The volume spike is another key clue of potential bullishness. The mass migration in and out of the stock suggests all the would-be sellers and weak hands were flushed out.
- The clinchers for the clue are a follow-through break above the near-term ceiling around $35.55 and then last year’s high around $37, marked in yellow on both stock charts.
WellCare Health Plans (WCG)
With nothing more than a quick glance, WellCare Health Plans just looks like a volatile, indecisive stock. And, perhaps that’s all it is. There has been more method to the madness of late than it seems with just a superficial glance though, and the bullish argument got even better last week, and better still on Monday. There’s just one proverbial fly in the ointment.
The recent buy signal is last week’s cross back above the 200-day moving average line, plotted in white on both stock charts. That line appeared to serve as support yesterday.
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- At the same time, WCG shares are logging higher lows.
- Although impressively bullish since late last week despite the marketwide bearish tide, the bullish volume is thin and waning.
- The line to watch from here is just under $290, where WellCare Health Plans peaked a couple of times since the beginning of the year. That ceiling is marked in red on both stock charts.
- The long-term uptrend has been bullish for years, driven by a rising support line that extends back to 2016.
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.