July 2nd – Weekly Technical Outlook
Now that is what you call a rally. After trading as low as 1306.75 on Thursday afternoon, the index has skyrocketed since then to close at 1356.50, a 50 point rally. Of course, a nice portion of that rally occurred during Thursday night’s overnight session when another potential solution to the European debt crisis was revealed.
To speculate whether or not the new plan will be of any value is useless. If the market believes in it, then do not fight the tape (which could not have been stronger on Friday’s close). So what is the plan now? First of all, the market cannot stall at these levels. This is the second attempt to clear the 1360 level since making the June low and we all know what happened when it failed at that level a few weeks back. For the move to continue, the futures must open on Sunday night, hold the close (1356.50) and plow right through Friday’s high (1359.50). Since there is no major resistance until 1385.00, shorts that did not cover late Thursday and Friday will be in a world of hurt. If the market decides to retreat, it certainly will not be a vacuum similar to the last time. The shorts looking to cover will have to compete with the “buy the dip” contingent that missed the dip, and the pesky High Frequency Traders looking to prey on any sizeable bid they can find.
If you went home short Apple (NASDAQ:AAPL), good luck. Unless Europe falls apart again on Sunday night, you will be covering at 590 (June 19th high). After flirting with the 570 level twice last week, AAPL exploded from the opening bell on Friday and closed at the high of the day (584.00). At this time, AAPL has not kept pace with the rally relative to the overall index, so it has some catching up to do. Expect some psychological resistance at 600, but no major resistance until 606.18. On the downside, there is minor support at 580 and major support at Friday’s low of 574.50.
Nothing like a seven point rally in Crude Oil, if you’re looking for a catalyst for Exxon-Mobil (NYSE:XOM). As a result of Friday’s two and a half point rally and close at 85.57, XOM is within a few points of its 52 week high of 87.94. Besides some minor resistance in the 86.50 area, XOM is poised to make another attempt at that level this week. If you are reluctant to buy into the momentum, wait for a pullback to fill the gap from Friday’s low (84.46) to Thursday’s high (83.46), although I am making no guarantees that will even happen.
What stands between Friday’s high (195.58) and 200 in International Business Machines (NYSE:IBM)? Absolutely nothing. Similar to AAPL, IBM has been a bit of a laggard, resting four points away from the same level it was trading at when the index was at this corresponding level. If you are tempted to try and short IBM, at least wait to join the High Frequency Traders shorting ahead of the size at 200. If IBM retreats, look for support in the same old familiar area of 192.50.
Believe it or not, Microsoft (NASDAQ:MSFT) closed down 11 cents on the week at 30.59. Perhaps the June quadruple expiration artificially inflated MSFT’s close that day and now it is back to trading on its own technicals and fundamentals. With respect to the technicals, MSFT has two major areas of resistance to clear ahead of the 52 week high at 32.95. First of all, this Friday’s high (30.69) coincides with last Friday’s high of 30.73. Once that level is taken out, there is a triple top to contend with from June 19-21 (31.11, 31.05 and 31.14). After that area, MSFT really opens up until the May 14th high of 31.54. Expect major support from Friday’s low (30.14) down to Thursday’s close at 29.91.
Is General Electric (NYSE:GE) finally the stock where investors want to be? Perhaps with GE still yielding 3.26% and limited gains off its 2009 low, this issue is the next AT&T (NYSE:T) in the making. With almost every other interest bearing instrument at or below 1%, this issue is hard for value investors to ignore. Now that is has distanced itself from the 20 level, GE is taking aim on it’s February 2011 high of 21.65. Of course it may take a day or two to chew through the size at 21, but GE finally has some momentum. Expect major support from Friday’s low (20.42) down to Thursday’s high (20.20). If GE retreats to 20, it may be time to load the boat.
Chevron Corporation (NYSE:CVX) was a beneficiary of the rally in Crude Oil prices along with XOM. After breaching major support at 99.50 early in the week, CVX’s visit under 100 was short-lived. The double bottom at Wednesday’s low (101.25) and Thursday’s low (101.43) set the stage for Friday’s rally which was interrupted by the closing bell at 105.50, it’s highest close since May 3rd. With only minor resistance at 107.06 and 107.65, CVX could well be heading for the May 1st high of 108.79. Expect buyers to step in if CVX attempts to fill the gap between Friday’s low (104.35) and Thursday’s high (103.65). Any pullback from 102, down to the mid-week lows, should attract large bids as the chances to purchase CVX under 100 have gone by the wayside.
The tug of war between 35 and 36 for AT&T (NYSE:T) is in full bloom with Friday’s close (35.66), nearly a 50 cent gain for the week. After Monday’s low at 34.77, buyers became more aggressive under 35 and initiated a double bottom on Wednesday (35.02) and Thursday (34.95). The strong close from Thursday followed through on Friday along with the rest of the market. With only minor resistance at 35.80, T will be mounting another attack on the institutional sellers at 36 and the HFT crowd that comes along with it. On any pullback expect minor support at 35.40 and major support at 35.
Has the sustained sell off from its 52 week high of 67.95 ended for Procter&Gamble (NYSE:PG)? Not if you follow the analyst from the Royal Bank of Canada who downgraded the stock on Wednesday after closing at 59.27 on Tuesday. From there it was straight up almost two points and with a strong close on Friday, expect more of the same Monday. With a current dividend yield of 3.67%, here is an opportunity to purchase the issue with almost 2.25 points of protection built into it. There is a very good chance of some capital appreciation as PG begins to retrace its nearly nine point decline since March. No major resistance to mention until 62.10, which will fill the first of two major gaps in this issue. If and when PG pulls back to 60, expect bargain hunters to be out in full force.
Johnson&Johnson (NYSE:JNJ) reminds me of the energizer bunny. It just keeps going and going and going. Finally clearing out the institutional sellers at 67 on Wednesday and mopping up a few more on Thursday, allowed JNJ to fly through a good chunk of the 67 handle on Friday. Next on the radar is the 52 week high of 68.05 and perhaps the October 2008 high of 69.07. Minor support can be found at the gap between Friday’s low (67.21) and Thursday’s high (67). Major support is located at the triple bottom from the Tuesday (66.41), Wednesday (66.36) and Thursday (66.44) lows.
One financial stock that has weathered the European and other banking crises quite well is Well Fargo (NYSE:WFC). After providing investors with three opportunities to purchase WFC under 32 this week, WFC joined the late rally on Thursday and did not stop until the market closed on Friday. Finishing at the high of the day (33.44) puts the issue nearly within a point of its 52 week high of 34.59. On the downside, expect minor support in the gap area between Friday’s low (32.97) and Thursday’s high (32.55). For long term value oriented investors, a pullback to 32 would offer a lower risk long term entry point for this issue.
In closing, follow through on the late week rally is paramount for the S&P to attempt a run at 1400. Traders and investors anticipating a failure at this critical level of 1360, may be in for a bit of a surprise come Monday morning. Frankly, there is very little resistance in this market up to 1400. This week will be the first opportunity in several weeks, where the bulls can inflict a substantial amount of pain on the already under water and on their heels bears. Stay tuned this week should be very interesting.
Comments are closed.