With a new month gives us new monthly charts for trading. Everything the market does is an opportunity to observe. Whether that’s a weekly chart, monthly chart or another timeframe.
I love when the calendar flips to a new month. Getting a look at the fresh closed monthly candlesticks is a fun task for me. Bonus points if the monthly close comes during the weekend, allowing some extra time to dig through the charts.
Let’s not waste any time and get a look at these charts. Below are three monthly charts. However, The Good, The Bad and the Ugly may not be 100% accurate. In the world of Wall Street, we might instead say, The Bull, The Bear and the Mixed.
Going in that order, we have the bull first.
Danny Riley is Mr. Top Step’s 39-year veteran of the CME trading floor and ran one of the largest S&P desks on the floor. Here’s what he’s thinking each morning before the stock market opens.
Trading Nike
On a weekly basis, Nike isn’t giving us a ton to work with. The stock continues to trend lower, albeit slowly, as the 10-week moving average weighs on the price.
However, we finally have a nice reset on a monthly basis. Nike is giving us an inside month, with April’s trading range completely contained within March’s trading range.
From here, I’d love to see an inside-and-up rotation over $138.24. That could put the $145 to $147 area in play and potentially a breakout over $150.
On the downside, the stock does face the risk of a two-times monthly down rotation. That comes on a close below $125.44. That would also put Nike below the 10-month moving average.
Zoom Video
Now for our potential bear. Both the weekly and the monthly charts look uninspiring for Zoom Video. Keep in mind, I like Zoom as a business. However, I am simply following the technicals here.
The 10-week moving average continues to weigh on Zoom. In March, it broke the 10-month moving average and failed to reclaim it in April. The stock did give us an inside month, although the risk becomes clear now: An inside-and-down rotation.
A daily close below the $310 to $314 area could kickstart a decline down toward $300 and would put a potentially larger correction in play. Who knows, maybe Zoom sees $250 as a result.
On the flip side, this chart becomes incredibly un-bearish if Zoom is able to go monthly-up over $345.
That will put Zoom stock back over the 10-month moving average and last month’s high, potentially allowing it to power higher. Over $360 and perhaps $400 is back on the table.
For now though, keep a close eye on that $310 to $314 area.
Trading Caterpillar
Caterpillar is a really interesting chart here. On a weekly basis, I love it. On a monthly perspective, I’m hesitant.
After 11 weeks without touching its 10-week moving average, we finally got a reset to this level. Earnings are out of the way and in most cases — even in this case, technically — a weekly-up rotation could get this stock moving again.
However, a weekly-up quickly puts Caterpillar in a potential monthly-up scenario. That’s as the $236 to $238 area has been resistance over the last two months. If the stock can clear this zone, we could get a further rotation higher.
That said, I’m hesitant of a monthly-down rotation below $223.20.
That would send shares below the 10-week moving average as well. I don’t know where the downside could land Caterpillar in that scenario. Perhaps $200 would be in play. However, it’s been on an extended run and there is a bit of divergence on the monthly chart.
As we all know, there’s no crystal ball when it comes to trading stocks, options or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk free for 30 days.
