Stock Trends Chart Analysis, Eye on Best Buy and FedEx
Companies / Company Chart Analysis Jun 14, 2010 - 12:26 PMBy: Mike_Paulenoff
There will be two significant earnings reports out this week. Best Buy Co. Inc. (BBY) will release their earnings before the market opens on Tuesday, and FedEx Corporation (FDX) will do so before the market opens on Wednesday.
Beginning with Best Buy, it's not a bad-looking chart. It peaked in April with the market and looks like the S&P 500 and overall stock market. Will earnings in Best Buy extend it to the upside? Will they have results that suggest that the economy has improved as a lot of the non-employment data have suggested recently? Do people have more disposable income to buy electronics, home office products, entertainment software, appliances, and related products?
Right now it looks like there's a pretty good chance Best Buy will be able to extend these gains. As of Friday last week, the stock was bumping up against its nearest-term trend line at the 41 level, and the earnings report on Tuesday could take it up to 43–44 level.
Because Best Buy looks so similar to the overall stock market (actually a little better than the overall stock market), we need to watch this stock. While some of the larger indices came down, tested, and marginally broke the February low at 35.17, Best Buy did not. If it can extend these gains and get over 45, then Best Buy will be outperforming the S&P 500 and may be an indication that the SPX, too, will follow.
So, in the days to come let's look at Best Buy to see how investors react to earnings and as a reflection of the overall stock market, especially the retail sector.
FedEx Corporation (FDX) has a very different chart. Going back to March 2009, the FDX chart has a very toppy pattern. It fully tested its February lows last week. While Best Buy outperformed on its way down from its highs, Fedex has not.
The earnings report Wednesday will be very important for Fedex. Key moving average resistance lies between 81.50 and 84. If Fedex has results that can't propel prices above 84, even 85, and it pulls back again to retest the Feb lows, it's a pretty dangerous situation for the stock.
Fedex is also an economic litmus test. Even though retailers such as Best Buy may have good earnings reports because they are the sellers of the latest gadgets, Fedex may actually be a better indication of the overall economy in terms of what's being packaged and shipped.
If Fedex doesn't take off and try to get above 84–85, then that could be telling about the economy and impact Treasuries, causing the iShares Barclays 20+ Year Treasury Bond (TLT) to move up as a reflection of Fedex.
So Tuesday, when Best Buy's earnings come out, we'll get an indication of the retail sector and Wednesday will give us more of a transactional view of the economy. These are two very different pictures, but ones to watch.
While 95% of the charts out there, like BBY and FDX, are in a range and are not yet telling us which direction they're headed, there are a few very bullish charts out there that look higher.
Navistar International Corp. (NAV), for one, looks great. It looks like it's consolidating at a very high level within its secondary bull move off the October-November low and going to take off yet again to test the top of the channel at 60, 61, maybe even the 62 level. As long as it does not break 50, Navistar looks excellent.
American Tower Corp. (AMT) is pushing a very critical level at 44–45, and if it breaks through it's probably going up to 48. American Tower and the tower area in general seems to be in the positive crosshairs of Wall Street and may have some serious upside still ahead.
NetApp, Inc. (NTAP), in computing and storage, is in an unbelievable uptrend. It looks like it wants to test the 41.50 highs from December 2006. This is an example of what a really good chart looks like, and in an atmosphere where retail stocks are struggling, and industrials improving but not looking stellar, stock pickers will see quite a contrast in the NTAP chart and note that something very indigenous to the stock and perhaps its sector may be going on that is extraordinary.
In that same area, EMC Corporation (EMC) hasn't acted quite as bullish as NTAP, but it looks like one to take a serious look at because it may be ready to make a strong move. It's an interesting stock because it seems to do some sort of head fake to the downside before it makes a move. It may be that it experiences position fatigue at times. It moves a little, stops for a rest, moves up again, rest again, and so on. Right now it's under 19 and looks like it could move up to 20, 22, maybe even the 25 level before long. It has a very powerful pattern.
Netflix, Inc. (NFLX) is one that everyone seems to be watching. There’s a rumor that one of the “biggies” is interested in Netflix. It has a parabolic chart that's unbelievable, and the weekly chart looks extraordinary. However, Netflix is a tough one. You need to have a stop and know when to get out, and there's a lot of volatility. The high on Friday was 121.55, closing at 120.69, and looks like it could keep on going.
Apple Inc. (AAPL), too, looks good. It looks like it's carved out a sideways rest period since late April. Now we’ve gone past late May to mid-June, so it's had 6 weeks of digestion and looks like it's done some work on the momentum side. This could be a launch pad for a move to test 266 1/2, and if that breaks to the upside, Apple will start to move, probably swiftly, towards a lot of the objectives that Wall Street's upgrading firms have for it: 300, 325, 350 and so on.
If Apple can't get through 265-66 and instead breaks its prior lows at 242, then the stock will have more correction and probably end up in the low 220 area as it tests its 200-day moving average. In general, Apple's in excellent shape, but needs to prove itself by getting above the 266 1/2 area.
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By Mike Paulenoff
Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.
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