Overall, U.S. stock investors seem reasonably happy at the moment. The macroeconomic environment is solid, despite growth around 2% in the last two quarters. Hopes persist that the trade war with China will see a resolution. Geopolitical uncertainty appears minimal. As a result, those investors have been confidently buying equities, and broad market indices sit at all-time highs.
But there are pockets of uncertainty in this market. Growth names have looked a little shaky. The broad market rally hasn’t made its way to small retail names or energy stocks. And as Monday’s three big stock charts show, there are a few widely-held names in tech where investors can’t seem to make up their mind.
Admittedly, these big stock charts don’t necessarily provide much in the way of clarity on the individual names. But on the whole, they do show that there are names out there that can still join the rally, even in tech — though it’s likely that rally has to continue.
International Business Machines (IBM)
International Business Machines (NYSE:) started the year off strongly, but it has been mostly sideways trading since the first month. And the first of our big stock charts suggests that might continue for some time:
- A brief rally from post-earnings lows has been interrupted, with longer-term moving averages providing resistance. IBM now is showing a sideways wedge formation, which signals a stock lacking direction. That formation usually suggests that IBM stock will accelerate in whichever direction IBM exits.
- The first of our big stock charts thus highlights an ambivalent market. The lesson from the chart makes sense in that context. Investors are in wait-and-see mode. But once the market makes up its mind, IBM stock seems likely to rally nicely, or potentially re-test December lows.
It’s not terribly surprising that the first two big stock charts look somewhat similar. After all, Oracle (NYSE:) and IBM share some core attributes. Most notably, both are companies that established business models on-premise but are now trying to catch up with new competition. Both Oracle and IBM, of course, are trying to gain share in the cloud services business currently dominated by Amazon (NASDAQ:), Microsoft (NASDAQ:), and Alphabet (NASDAQ:,NASDAQ:GOOGL).
But from both a near-term and long-term standpoint, the ORCL chart looks much preferable to that of IBM. The question at the moment might be whether that will hold:
- Meanwhile, from a longer-term perspective, Oracle stock still looks solid. The uptrend hasn’t necessarily been consistent, but Oracle has found a way to drive shareholder value over time. ORCL stock has doubled from 2012 lows while providing a dividend along the way.
- Despite the gentle grind higher, Oracle stock isn’t out of the woods. Volume of late has been muted, which undercuts the bullish move out of the wedge. Fiscal Q1 earnings in September disappointed relative to Street estimates, and the Q2 report arrives in about a month.
It seems like Square (NYSE:) had an opportunity last week and didn’t take advantage. That seems true both fundamentally and in looking at the last of Monday’s big stock charts:
- Technically, the same was true. SQ stock had made a bullish reversal out of a declining narrowing wedge. Shares cleared the 20- and 50-day moving averages. There was a modest uptrend from September lows. Square stock was moving in the right direction.
- Fundamentally, too, Q3 doesn’t look like quite enough. I wrote after the report that a one-day rally was , and at least in the early going the market seems to agree. A muted outlook for 2020 offsets some of the optimism from the performance of Square’s Cash App. And with Square stock still expensive in a market that appears to be questioning valuations again, a decent quarter just isn’t good enough. SQ has been rangebound since early August, and it appears likely to stay that way until at least 2020.
As of this writing, Vince Martin has no positions in any securities mentioned.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.