Boeing (BA) - Get Report is up over 55% year-to-date and is the best-performing stock in the Dow Jones Industrial Average this year, and Amazon (AMZN) - Get Report and Netflix (NFLX) - Get Report shares are up 32% and 45% respectively in that time. There is, however, early technical evidence to suggest a transition in investor sentiment is underway and these particular out-performers may be preparing for a period of consolidation or a deeper corrective move.
Boeing reported positive earnings last week, and the stock soared 12% in two days, but this week, investor sentiment moderated and shares have pulled back. The price action highlighted in the black box on the day of the chart, shows the kinetic energy of last week's rally dissipating as the stock approached the $245 level. A high-wick small opening and closing range "doji" candle formed, marking the point of maximum potential downside energy. A large dark engulfing candle immediately followed the doji, and it was followed by a second high-wick candle. The technical message is one of transition from bullishness-to-bearishness, but it remains to be seen if the move will gain energy and continue heading lower.
The weekly chart of Amazon shows the stock moving higher in a clearly-defined rising triangle pattern for the last two years. Last week a large high wick candle formed and closed below the previous week's large white candle closing price. This week a large dark candle is under construction and, if it closes out the week at the bottom of its range, a three-period eveningstar pattern will have formed on the chart. This pattern also implies transition in sentiment from bullishness-to-bearishness and often signals reversals in long-tern uptrends. The relative strength index is moving below its 21 week average and out of an overbought condition, and while Chaikin money flow has declined over the last several weeks, it is still well into positive territory.
The transition period highlighted on the Netflix chart began three weeks ago. While it isn't a perfect eveningstar pattern, it can be interpreted in much the same way. The large white candle represents the continuation of investor enthusiasm after the gap higher, which is followed by three narrow overall range candles suggesting indecision, and then the large dark candle indicating loss of confidence. The stochastic oscillator is making a bearish crossover and the Chaikin oscillator, an average of the 3-day and 10-day accumulation/distribution line, is below its signal average. If Netflix shares were to break below the $174 level, they would fall into a resistance vacuum, and the likely downside target in that case would be the 50-day moving average.
Amazon's shares fell 0.9% to $987.40 on Friday morning. Boeing's rose 0.3% to $238.57, and Netflix's fell 0.6% to $179.69.
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The author is an independent contributor and the time of publication had no position the stocks mentioned.