Despite the negative news flow, Exxon Mobil (XOM) has been unable to retake the key former support-now-resistance level defined by the October, December and January lows. This is telling action and suggests that any positive news could initiate another period of weakness in the energy sector.
Netflix (NFLX) has been trading in a large range channel for a year. This month it’s pulled back from a retest of channel resistance to an interior level of support and its 200 day moving average.
The daily chart shows the shares trapped between the 50 and 200 day moving averages for the last eight trading days. The RSI and the MacD are trending lower and below their centerlines, and money flow turned negative this month. A break below the 200 day moving average has the potential fill the support vacuum of the January gap and retest the lower end of the channel.
On Monday, I noted the negative implications of Friday’s sharp intraday drop in the iShares Nasdaq Biotech ETF (IBB). The bearish price action in this hot sector may have been a harbinger for the broader market. An eveningstar reversal yesterday on the daily charts of the major indices was followed by a sharp decline in today’s session.
Focusing on the S&P 500 chart, it shows the index just below the intersection of its January highs and 50 day moving average. If it can get back above it tomorrow this reinforced level should provide technical support. However, if the slide were to continue, the next support level is this month’s low, and then the 200 day moving average, about a 4.9% move off the eveningstar high.
On March 12, I highlighted the morningstar patterns on the daily charts of the major indices. These bullish reversal patterns played out over the last two weeks reversing the decline that began at the beginning of the month, and taking stocks higher. But yesterday an eveningstar pattern made an appearance on those indices. This sister pattern consists of bearish transitional price action, with a large white candle, followed by a narrow opening and closing range doji candle, and completed by a large dark candle. Like all candle patterns it requires confirmation, but certainly has the potential to define a short-term reversal point. The momentum indicators have flattened, and the Chaikin Money Flow indicator has moved just below its centerline, reflecting negative money flow.
Shares of GoPro (GPRO) broke above a long term uptrend line last week and moved above their 20 day moving average. The stock has been in a severe downtrend for the last four months, making a well-defined series of lower highs and lower lows, and until that dynamic changes the downtrend remains intact. But there has been slight improvement in price and money flow momentum, and with a 37% short interest in the stock, a bounce could see some traction.
The S&P 500 is retesting its December high level. When this level was broken in March, the index dropped 2.5% before finding support and recapturing its 50 day moving average. Currently, the 50 day average is reinforcing a horizontal support line drawn off the January highs, and a retracement to this level would only be a modest 1.3% decline. The price momentum indicators are still in positive territory and support is intact, but the Chaikin Money Flow indicator, which uses a look-back period that includes the March decline and rebound, is tracking lower.