Granny Shot Technicals: Recent additions

Technical Strategy Video (Recorded Wednesday, November 3rd):

Key Takeaways

• AAP, AZO, KLAC are the most bullish technically right now given their recent parabolic price action. While all are overbought, these also are ones to buy dips
  
• WRB, AVGO, look to be two that are on the verge of a larger advance, specifically based on structure
  
• PHM, ROST, ATVI are the only three to technically lie in near-term downtrends from September; However, this weakness looks to be nearing areas to buy in all three.

Pulte Homes (PHM 0.96% - $47.79) Attractive risk/reward given its pullback to meaningful support near the 38.2% Fibonacci retracement of the entire run-up from the March 2020 lows. PHM had meaningful former highs near 46 in early 2020 as well as considerable trading history between 40-46 during most of 2020. Thus, pulling back to this area should offer appealing support to buy dips and/or position long for a push back to new highs. As the saying goes, former resistance often brings about meaningful support on a retest. Sector-wise, PHM trades in a very favorable sector from a seasonality perspective, and investors have the chance to buy this stock over 20% off its all-time high peaks made earlier this year. Weekly momentum does still trend negatively in PHM; However, given this attractive area, its right to consider this stock in the mid-to-high $40’s , looking to add to longs on any movement back over $52. This would break the downtrend from this year, allowing for a more meaningful rally up to the low to mid-60s to challenge all-time highs. Conversely, a decline under $45, while not expected right away, would serve to postpone the advance, serving as a short-term Stop level for those investors who wish to manage near-term risk.

Advance Auto Parts (AAP 0.81% - $226.77) Bullish but stretched at current levels after its massive breakout of consolidation going back since 2015. As AAP’s weekly chart shows below, this began to accelerate rapidly in March of this year after surpassing $180. That spring breakout fueled a 20%+ rally into October, but has resulted in some minor negative momentum divergence. Overall, the bullish breakout of the 6+ year consolidation means more as a positive, than some minor overbought conditions. It’s thought that any minor weakness would constitute an excellent opportunity to buy dips. Upside targets lie at 243.75 than 272. Only a move back under $197 would postpone a further rally.

Autozone (AZO 0.57% - $1,788.15) Autozone remains one of the strongest stocks within the Consumer Discretionary sector, having gained more than 1000 points or 160% off the March 2020 lows, a near Triple. While recent gains have begun to rise parabolically, this remains attractive given the rotation into Auto and Auto parts stores, and technically represents the “best in class” within this group. Weekly momentum has gotten understandably overbought; yet it’s right to be long given how positive trend and momentum are, looking simply to add to longs on pullbacks to this larger intermediate-term trend. Pullbacks to $1450 would afford an even better risk/reward opportunity to buy dips, while upside technical targets lie near $2000. (FIB RATIO calculation of the prior move needed ))

Broadcom (AVGO -1.19% - $537.07) Bullish and further upside likely to near $570 after its meaningful technical breakout of former highs near $485. AVGO has literally just begun to join the strength of the Semi sector after languishing in range-bound consolidation for much of 2021. Normally, lengthy periods of choppy, range-bound consolidation that are exceeded will lead to an uptick in upside volatility as short-term trends change from Neutral to more bullish. Yet, given this neutral- range-bound trading throughout much of this year, momentum hasn’t really moved to overbought levels like most of its peers. Given the symmetrical nature of last year’s rally, this latest surge likely will form a price and time retracement to last year’s move, so as this nears $570 it could be prudent to check DeMark counts and/or cyclical studies for any evidence that this might stall/reverse course.

Activision Blizzard, Inc. (ATVI-$77.67) Following nearly a 2-year advance from early 2019, ATVI has now given back 61.8% (Fibonacci ratio) of this prior rally in recent months as the Video Game/Interactive Entertainment sector suffered some severe rotation out of the group in recent months. However, this area could be important as it represents two-year trendline support along with a key Fibonacci ratio of the rally up from 2019. Weekly RSI is now oversold, and ATVI should begin some stabilization which then could lead to a healthy bounce into December. Failure to hold $64.50 would postpone any rally, arguing for a pullback to $57. This would align with the long-term support trend from late 2012. Overall, this looks to be getting close to support. Upside targets initially near $87, then $90-95.

Ross Stores (ROST -1.50% - $114.54) Attractive to own given this stock has found good support right at its 38.2% Fibonacci retracement and Ichimoku Support area (Bottom of Cloud) and has bounced now for 3 straight weeks. Despite weekly Momentum being negatively sloped, ROST’s near-term technical situation has improved quite a bit given its ability to have exceeded the downtrend from mid-August. This should fuel a further rise up to $120 which is the make-or-break level of resistance as to whether ROST pushes back to new all-time highs. Elliott-wave structure from last March seems to suggest ROST should push up to challenge and break above $134 before any real top, so at $113.20, investors are getting the chance to buy ROST at nearly a 20% discount from where it traded back in early May. While momentum needs to improve a bit more to help ROST start to show more acceleration, it looks like an attractive risk/reward at current levels. Trading stops lie at lows of $104.92 from three weeks ago.

Marathon Petroleum (MPC 2.81% – $64.64) Bullish, but consolidation might occur near-term which should set up more attractive risk/reward opportunities to buy. MPC’s rally from 2020 lows stalled out within $1 of prior peaks and occurred at nearly exactly a two-year anniversary to former highs from late October 2019 at $69.65. Momentum is sloped positive per MACD, as might be expected, but both MACD and RSI show three consecutive lower peaks in momentum since March (Prices have risen, but momentum is making lower highs) DeMark counter-trend exhaustion might also be confirmed on a 11/5 weekly close under $65.16. Overall, Trends did improve quite a bit technically following the early year downtrend line breakout. However, the minor stalling out right near former highs likely results in fractional weakness to $61-$62.50 which should represent an appealing area to buy weakness.

EOG Resources – (EOG 1.58% -$92.82) Structurally attractive at current levels, but a bit overdone near-term after September’s sharp rally carried EOG to the highest levels in over two years. This area just under $93 (92.87 to be exact) represents the 61.8% Fibonacci retracement to the entire selloff from October 2018 highs. Momentum is positively sloped but RSI has officially gotten back to overbought levels after this most recent run-up. This could benefit from some consolidation and would be an excellent risk/reward on weakness down to $85-$87. Gains over $95.50 would result in a continued push higher which should reach $107 which is the first real target before $119.50 which is 100% alternative projection from the rally off last October’s lows.

Texas Instruments (TXN- $189.35) Texas Instruments remains a top technical long within the Semiconductor space and continues to show excellent technical strength as this trades within striking distance of all-time highs. The stock more than doubled off its March 2020 lows before entering into consolidation near all-time highs about six months ago. While a few different breakout attempts back to new highs failed thus far, TXN remains just 6% off all-time highs and even following last week’s decline, and structurally has shown little to no real deterioration. Pullbacks should encounter strong support at $175-180 while movement back up above $202 should allow for a push to $215-220.

Ulta Beauty – (ULTA- $371.86) ULTA looks in need of consolidation after rising more than 200% off its March 2020 lows. Recent churning over the last month has occurred at a similar level as 2019 peaks, and weekly momentum shows negative momentum divergence after ULTA’s rally and then recent consolidation near highs. As weekly charts show, ULTA has had a history of making minor new highs above a former level that reverses course and fails, and the recent peak into August looks to have occurred right near the upper boundary of its trend channel connecting highs from 2017. Pullbacks to $330-340 would make this more attractive technically to buy dips. However, until ULTA clears the upper resistance boundary at $415, it looks a bit tired technically given its trading pattern in recent weeks. Minor weakness within its 18-month uptrend would make this more appealing to buy dips.

KLA Corporation – (KLAC -0.24% -$388.75) Bullish technically and last week’s strong gains look likely to fuel this higher up to near-term technical targets at $440-450. The consolidation in KLAC since February has failed to do too much damage, but has helped to lessen overbought conditions after last year’s run-up. Structurally, KLAC remains in very good shape, as both pullbacks into July and October lows of this year managed to hold the ongoing uptrend and last week’s gains managed to help this record a new all-time high weekly and monthly close. The recent momentum thrust caused by last week’s gains should make this appealing to own and buy dips if given the chance near $346-356. Pullbacks under $318 are required to change the near-term structure, which look premature given this bullish structure.

W.R. Berkeley – (WRB-$81.62) Bullish on an intermediate-term basis but near-term WRB likely should find consolidation near highs of this resistance channel that’s held since early 2020. Its structure is reminiscent of a large Cup and Handle pattern with pullbacks in recent months proving short-lived before moving back to challenge prior highs. Given that both peaks in the last year occurred near similar levels while the lows have occurred at a very steep ascending pattern (of higher lows) bodes well for this to eventually move up and break out of this recent range. Breakouts of $83 will lead to acceleration up to at least $90 given this structure. Thus, one should position long at current levels, looking to buy all dips, with plans of adding to longs above $83 in the weeks/months to come. Only a break of $70 would alter this bullish scenario which is not expected at the present time.

U.S Bancorp (USB- $60.86) Ongoing near-term consolidation from USB has occurred over the last month following a sharp run-up to test highs established back in May. Interestingly enough, weekly charts going back five years detail the three consecutive higher peaks that happened after this initially peaked out back in 2017. Thus, while trends and momentum have been positive since last March, there remains a level of overhead resistance that comes in near $63-64 that will be important to surpass to allow for this rally to continue. Dips likely find strong support at $54-$56 and should present good buying opportunities on weakness. Overall, while it’s right to find this pattern positive, there does look to be some work to accomplish before another push higher can get underway.