What an end to the week! Although the overall market only lost a tiny amount of ground on Friday, the day's big winners were huge, as were its losers. Skechers (NYSE:SKX) tumbled to the tune of 21% after it missed last quarter's earnings estimates and suffered a string of downgrades. Meanwhile, Cleveland-Cliffs (NYSE:CLF) shares jumped more than 12% on its blowout second-quarter numbers.
Such wild swings don't always make for the best trading setups though; big moves invite big reversals, even if those reversals don't materialize right away. The top "new" prospects are still stocks that have been working on well-founded moves that materialize over at least a few days.
To that end, Wells Fargo (NYSE:WFC), Philip Morris (NYSE:PM) and Gilead Sciences (NASDAQ:GILD) are taking shape as the most viable trading prospects as the new trading week begins.
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Wells Fargo (WFC)
Most bank stocks have found new life of late, perking up in response to a wave of encouraging quarter reports.
Wells Fargo, though, is one of the few that appears to have more bullishness ahead of it than most other names in the business… warts and all. One or two more good days could do the trick.
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• It was a hard-fought battle to get there, but the 200-day moving average line (green) WFC shares cleared late last month has since become a technical floor.
• Though the monthly chart is taking two steps forward and two steps back, it's doing so reliably. The rising Chaikin line and accumulation-distribution lines say there's quite a bit of obscured buying interest that's waiting to fully be unleashed.
• WFC shares will need to move above their recent ceiling around $51.13 to put the finishing touches on the budding uptrend.
Philip Morris (PM)
Philip Morris, like its cigarette-making peers, faces a grim future even if their end is well beyond the horizon. Eventually, the global smoking-cessation effort will catch up with the industry. That doesn't mean we're not going to see these stocks dish out the occasional bullish swing though. It looks like one was just started, ironically kick-started by a post-earnings plunge that ended up being a capitulation.
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• On early Thursday, PM shareholders had to be feeling pretty terrified. By Thursday's close, they were thrilled. By Friday's close, they were ecstatic … provided they stayed in. The knee-jerk reaction to a mostly disappointing Q2 report ended up flushing out the last of the would-be sellers, clearing the decks for a flood of new buyers.
• Although the bears may push back a little in the near-term, the long-term undertow has already taken a bullish turn, with April's stumble leaving behind plenty of room to rebound.
• Altria Group (NYSE:MO) shares more or less made the same move, confirming the tailwind behind the new rally. PM shares, however, suggest they've got a better technical foundation.
Gilead Sciences (GILD)
Last but not least, Gilead Sciences has been a tough name to handicap for a while now. It's not always fighting the portfolio and patent headwind it sometimes seems like it is, but sometimes, it is. The end result is an erratic chart.
If you can figure out where the sentiment ebbs and flows are though, you can make some good money on a swing trade. It's worth watching closely right now mostly because there's a clear ceiling in place that, if crossed, could spark another trade-worthy wave of bullishness.
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• In the monthly timeframe, we're seeing a renewal of a bullish MACD divergence.
• On both the monthly chart and the daily chart, we can see there's volume behind the budding bullish effort so far. On the former, the Chaikin line is edging higher again, and on the latter the accumulation-distribution line has renewed its uptrend.
• The big line in the sand is $77.79, where shares have peaked for the past several trading days. If GILD can move past that hurdle after picking up steam as it has for the past few days, it could be like releasing a catapult.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
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