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Must-See Charts: Bank of America, Cisco, Exxon - 6632 views
The stock market continues its search for some kind of meaningful direction this week, otherwise churning as unsure traders try to snipe small-percentage gains from intraday price movements.
Economic data slated for release today could give investors some insight into where things are headed — US jobless claims were released at 8:30 a.m., clocking in at their highest levels since November 2009, clearly a bad thing for long-biased investors.
This morning still holds hope for good economic data, however. With leading economic indicators, and a Treasury note announcement still ahead of us as of this writing, traders will have plenty of opportunities to digest new data today.
Not all of the news to hit Wall Street has been bad this week. As expected, GM announced its plans for an IPO Wednesday evening, offering $100 million in common shares alongside an undetermined number of series B preferred shares. The company will reprise its former ticker symbol, GM, on the NYSE.
With all of the market’s mixed signals, it’s no surprise that investors are having a tough time figuring out what’s going on in the equity world. Despite the market’s machinations, there is some sense to be made of it thanks to the technicals.
Technical analysis uses a stock's price movements to determine where shares are headed in the future. Technical charts are used daily 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.
Here's this week's look at how some of the biggest names on Wall Street are trading technically.
Bank of America (BAC) has been struggling to keep its head above water this year, as strong fundamental performance -- like a strengthening balance sheet and growing customer base -- battle against bearish market sentiment.
The bank, which incidentally is one of the underwriters of GM’s IPO, has been increasing its focus on the retail banking business, a strong source of low-cost funding for lucrative lending projects. But despite the fundamental tailwinds in its favor, Bank of America is likely headed lower in the mid-term.
Shares of the big bank have been stuck in a downtrending channel beginning in mid-April, when increased volatility hit the market in earnest. Since then, shares have been obedient to those channel-bound support and resistance levels, signaling that it’ll take a significant change to break Bank of America free from the trend.
While shares are currently on the upswing, the bullish action should be short-lived. Expect shares to find resistance at the upper blue line -- likely around $14.10. I’d recommend staying away from the long-side of this stock until it’s out of the channel for good.
Things aren’t looking much more attractive for high-tech networking giant Cisco (CSCO). The company got bid down in a big way last week following earnings that clearly missed the mark for Wall Street. Key to the selloff was management’s outlook for the already pressured IT industry — fiscal 2011 looks tough for shareholders.
Immediately following the gap down in Cisco’s share prices, investors starting buying back shares, pushing it back up toward pre-earnings levels, but quite frankly I doubt shares will make it much higher. On the way down, Cisco crossed through its 50-day moving average, a level that’s now acting as staunch resistance for the stock. It’ll make any sort of sustained return to levels above $22.90 difficult in the short term.
While the near-term technicals don’t look particularly appealing for Cisco, its mid-September analyst conference could be a good catalyst to attract institutional buying. We’ll just have to wait and see. If shares bump up against the 50-day, though, expect a subsequent bounce lower.
Not all of the big-name stocks on Wall Street are showing bearish technical patterns right now, though. Shares of oil monolith Exxon Mobil (XOM) could be headed higher in the near term.
In late July, shares of Exxon broke above the 50-day moving average, an indicator that’s since been acting as a moderate support level. Shares started bouncing higher off of support last week — with the next meaningful resistance level at the 200-day moving average nearly 9% higher, the potential for a nice technical-driven rally is real right now.
If you’re considering going long Exxon shares, protect your capital: make sure you place a tight stop loss right below the 50-day.
To see this week’s trades in action, check out the Here's High Volume Technicals portfolio on Stockpickr.
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.