Following through on Tuesday’s gain, the S&P 500 added another 1.09% to its value on Wednesday, ending an otherwise miserable October on a high note. It was far from ideal though. The index peeled back from its intraday high, and the opening gap left behind now beckons the market lower again … even if just to close the gap.
Not every name was a winner though. Gilead Sciences (NASDAQ:GILD) fell 5.4% after UnitedHealth Group (NYSE:UNH) unveiled a new plan that favors lower-cost HIV treatments, putting Gilead’s core business in the crosshairs.
None of those stock charts look particularly well-suited for short-term trading (or long-term trading) headed into Thursday’s action though. Rather, investors may want to take a closer look at Walmart (NYSE:WMT), Prologis (NYSE:PLD) and Incyte (NASDAQ:INCY). Here’s what to look for.
Walmart has been one of the market’s bigger winners since June, up more than 20% in that short timeframe. And, it remains one of the market’s top long-term holdings.
In the short run, though, the shape and placement of Wednesday’s bar suggests there’s a bit of downside in the cards before the uptrend is renewed.
Click to Enlarge • The noteworthy nuance of Wednesday’s action is that it’s a near-perfect mirror image of Tuesday’s bar. Not only are the open/close and high/low ranges almost perfectly lined up, the open-to-close ranges use almost the entire low-to-high ranges. The only difference is the direction of the intraday action. This pattern is called a marubozu, and to see two opposing ones back to back also suggests a reversal from an uptrend into a downtrend.
• The weekly look at WMT also indicates the stock is overbought and ripe for a reversal, though we also have to respect that the same situation didn’t slow Walmart down late last year.
Just a few weeks ago, Prologis shares were toying with a breakout move that was to be fueled by a consolidation period within a fairly narrow trading range. Now, PLD shares are not only not in breakout mode, they’re fighting to sidestep a meltdown. Fortunately, the edge of the cliff isn’t within immediate reach. It’s far from being out of reach though.
Click to Enlarge • Prologis has been range-bound for weeks now, trapped by a handful of support and resistance lines plotted on the daily chart. The 200-day moving average line, in white, is one of those lines that’s been support as well as resistance, and is about to be tested as a floor once more. Note that the ceiling near $66.50 was the prompt for Wednesday’s roll-over.
• If the 200-day moving average line fails to hold up as a floor, the next stop is around $62, where PLD has found support a couple of times since July.
• On the weekly chart, shares have already fallen back below a rising support line that’s kept the rally going since late-2016.
Finally, Incyte shares have been testing the waters of late … on both sides. The break below a key technical level on Tuesday didn’t last long, and set up Wednesday’s big bounce. But, INCY shares hardly bounced out of their vulnerable state. The stock’s still within reach of a breakdown that could inspire a wave of profit-taking.
Click to Enlarge • The $60.50 level is the make-or-break mark, where INCY has made lows a few times in recent months. Shares briefly broke below that level on Tuesday, but showed no willingness to remain there.
• On the other hand, though short-lived, there was a lot more selling volume behind Tuesday’s temporary stumble than there was behind Wednesday’s rebound. Also note that Wednesday’s gain didn’t actually push Incyte back above most of the key moving average lines.
• In that any break below the $60.50 area would drag INCY into unfamiliar territory, there’s no telling where the selling might end. In that even, look for the usual clues of a capitulation.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.