There are over 7,000 stocks listed on the U.S. exchanges, but only a handful seem to capture everyone's attention from day to day. A few of these highly popular equities, like Apple (AAPL) - Get Report, are so widely held that fortunes are made and lost every time the stock wiggles a few points in either direction.
The recent selloff has induced seismic shifts in these household names, triggering sleepless nights and second-guessing by the folks that loaded up on long-side positions during the market's aborted recovery. And if my inbox is any indication, investor emotions are nearing critical levels, as the major indices tick closer and closer to the March lows.
Let's look at four of the biggest story stocks on Wall Street and see where they might be headed in the next one to three months. I suspect this analysis won't make shareholders happy, and I'll suffer the consequence with the typical flames these stocks induce when I don't stroke them like furry pussycats. Oh well, that's life on this side of the keyboard.
Apple topped out in May, after failing to test the all-time high at 202, posted in December. It was a noteworthy failure, given the recent launch of their 3G phone. The stock has been pulling back for the last six weeks, retracing nearly 30 points before Friday's bounce. Notably, it's still trading above the 200-day moving average support.
I've been watching the trendline drawn across the recent selloff lows. Despite last Friday's reversal, price is more likely to hit that support line than to trade back above 182, especially in this wicked market environment. So let's look for this bounce to fail and give way to a renewed downdraft that yields a stronger buying signal closer to 157.
Also, look at November's selloff into 150 because it should offer a good reference point for price action later this summer. A turnaround at or above that level would mark out the boundaries of a bullish inverse head-and-shoulders pattern. This is a consolidation pattern that triggers a buy signal when price rallies above the "neckline" drawn across the highs.
Research in Motion
Research in Motion
is in major trouble after last week's poorly received earnings report. The stock rallied to a 137 high in November and spent the next six months pulling back and consolidating its strong gains. It finally broke out a week before earnings, hit 148, and pulled back a few points just ahead of the news.
The release triggered an 18-point gap on twice the average daily volume. Continued selling pressure into week's end dropped the stock to 116, which erased almost half the gains posted between February and June. While this issue should bounce soon, it's nowhere near a recovery phase because higher prices will be sold aggressively.
The violent downturn triggered a weekly "2B" sell signal, which denotes a reliable short-sale setup after a failed breakout. Shareholders trapped at higher prices should keep pressure on this former leader for weeks or months, raising the odds this decline will accelerate and drop price into the March gap near 105.
rallied to a 283 high in late December and pulled back with the broad market. It bottomed out 140 points lower in January and began a steady recovery. The stock returned to the high in April and dropped into a sideways pattern that tested round-number resistance at 300 for over six weeks.
The stocks tagged a new high at 317 on May 14, but the upside never gathered steam, inviting short-sellers to reestablish positions. The next downswing carried over 80 points before giving way to a fresh bounce about three weeks ago. Sadly, this uptick is also running out of gas at the seemingly impenetrable barrier near 300.
The stock has performed well considering the broad market decline, but it really has no place to go right now, except down. The rest of the solar sector is dragging in the mud, buffeted around by stalled legislation in the United States and Europe. I believe it will take higher equity prices across the world to finally lift this stock to new highs.
posted an all-time high at 747 in November and entered a steep correction. The decline dropped price well below the 200-day moving average before the stock bottomed out near 400 and started a weak recovery. The upside accelerated with a 90-point gap in April, after the search-engine giant posted a strong earnings report.
Unfortunately, it's been nothing but trouble for company shareholders since that time. Despite earnings-driven euphoria, the rally topped out just 11 days later at 602. Gravity then took over, dropping the stock back to multiple support levels near 545 that were broken decisively last week.
The stock is now trading below the opening price of the April gap. This poor positioning means everyone that opened long-side positions after earnings is now losing money. It's a bear dynamic that should keep weight on any recovery attempt, especially with the sell signal triggered by last week's breakdown.
The prognosis for Google going forward isn't a pleasant one. Simply stated, the stock is likely to fill the big gap this summer and trade back into 460.
Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.
At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.
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