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Must-See Charts: Apple, Bank of America, Intel - 56174 views
BALTIMORE (Stockpickr) -- We’re approaching the two-week mark for the market’s being “out of whack.” By that, I mean that stocks have been trading lower coming on two trading weeks, a big shift from the accelerated uptrend that stocks had been riding since back in July 2010.
That said, given that the selloff has been fast and furious to this point, it’s likely that we’ll see the market pump its brakes today, as the S&P 500 starts to look oversold by conventional measures.
At present, the market’s sitting atop a weak support level, and I think that a move lower is the likelier of the scenarios out there. Since the S&P is a mere 40 points from its secular trend line, a retest of support at that level could be a more realistic possibility. That said, the market’s looking especially strong this morning, so a meaningful bounce may well be in the cards.
It shouldn’t come as a surprise that trading activity has been through the roof in the past several days; yesterday, the NYSE and Nasdaq registered volume that was more than 40% greater than their trailing three-month averages. Because Wall Street’s biggest names ultimately make up the averages we call “the market”, it makes sense to take a look at the technicals on the most heavily traded names right now.
Technical charts are used every day by proprietary trading floors, the Street's biggest financial firms and individual investors to get an edge on the market. And according to some sources, skilled technical traders can bank gains as much as 90% of the time.
Every week, we take an in-depth look at three large-cap stocks that are telling important technical stories right now. Here’s a glimpse at this week’s stocks.
Apple (AAPL) has long been a Wall Street favorite, a heavily traded stock that’s made all the more interesting by a prodigious fundamental growth story. Indeed, while most broad indices have produced moderate returns in the last year, Apple delivered gains of nearly 46% in the trailing 12 months on the heels of incredibly successful sales results for its iPhone, iPad and Macintosh lines. Now, following a shakeout in shares, Apple could be due for a bounce.
As with the rest of the market, Apple has taken its knocks in the past couple of weeks. Shares are down more than 8% since last Monday, the result of a particularly bearish double-top formation that developed in shares starting in early February. But the double-top has largely played out already, shaking out unconvinced bulls in the process. With shares sitting near support, this stock could be prepping for a bounce.
Yesterday, Apple’s shares sold off to strong previous support above $325, but only intraday. Shares quickly snapped back to higher levels as sellers met with a strong pocket of demand for the stock. If you’re looking to be a buyer of Apple right now, this week could be your chance at a low price entry.
Apple was one of 10 stocks that mattered most to hedge funds in the most-recent reporting period. It's one of TheStreet Ratings' top-rated computer hardware stocks, and it was recently included as one of five growth stocks trading at reasonable prices.
Bank of America
One of the biggest tumbles in the recent market slide came from the financial services sector. Big banks have already been under considerable pressures lately, but those investor concerns have only been made palpable under selling pressures from the market. Bank of America (BAC) has been one of the hardest hit, and the stock’s current setup suggests lower prices could be still to come.
Bank of America had been forming a symmetrical triangle pattern since the beginning of 2011. The pattern in and of itself doesn’t tell us much about the likely direction of BAC’s price action, but it does provide us with a breakout range to watch for in shares. That’s significant.
Shares broke below the bottom of the range on Monday and confirmed their lower level in yesterday’s trading. That said, it’s not time to short Bank of America just yet. Luckily for shareholders, support at the 200-day moving average is just under current price levels. We’ll want to see the 200-day get cracked before it makes sense to go short. If that happens, shares could reasonably fall to $12.75 in the next two weeks.
A somewhat more bearish setup is taking form in shares of semiconductor giant Intel (INTC). A double-top setup (much like the smaller one in Apple that had already played out) could spell lower prices for this firm. This pattern triggered on Monday on the stock’s break of its intermediate trough at around $20.50. That makes since a tradable downside play right now.
Keep in mind that the strength of a bounce today could realistically derail the bearish potential of this setup. While that doesn’t take this trade off the table, it does warrant placing a calculated stop to protect against a major move for shares. I’d recommend a stop at that $20.50 level.
To see this week’s trades in action, check out the High Volume Technicals portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.