With the Magnificent 7 stocks struggling to hold up through a tumultuous earnings season, what sort of opportunities are emerging on the charts going into November? Today, we’ll break down some of the names we’ve included in our Top Ten Charts to Watch for November 2024.
Some of these charts are overextended, having already logged significant gains in the last month. Others have already experienced short-term pullbacks and may provide actionable entry points around an ascending 50-day moving average. Still others may be worth following less as an investment candidate, but more as a good measure of overall risk appetite for investors.
Let’s start with one of the sectors that I have found investors to be generally underweight, even though the relative performance has really begun to shine in recent months.
Stifel Financial Corp. (SF)
In my recent podcast interview with Ari Wald of Oppenheimer, we talked about emerging strength in the capital markets group, fueled by likely Fed rate cuts into early 2025. Stifel Financial Corp. (SF) has made a new 52-week high pretty much every month in 2024, October included.
After recently pushing above the $105 level, the stock has now pulled back enough to bring the RSI back below the overbought level. While the overbought condition speaks to the strength of the long-term uptrend, we can see that previous pullbacks in May and February featured a very similar configuration with price and momentum indicators.
This is the type of chart in a clear long-term uptrend of higher highs and higher lows. But given the recent drop in the RSI after the October peak, I’d be looking for a tactical pullback which could provide a new higher low. The 50-day moving average is often an area where this sort of pullback could occur, similar to frequent tests earlier this year.
Home Depot, Inc. (HD)
The chart of Home Depot (HD) may provide a perfect example of the “fat pitch” chart, marked by a short-term pullback within a long-term uptrend. The stock broke above its March high around $390 in September, and, after peaking around $420, the price has pulled back to that same pivot point.
This chart provides a clear illustration of the technical analysis concept of “polarity”, where resistance later becomes support. Given that HD has pulled back to this pivot point around $420, as well as an ascending 50-day moving average, I’m inclined to label this as an actionable pullback within a long-term uptrend phase. Also note the RSI just above 40, which is often the lower end of the range for RSI when the stock is in a bullish phase.
Alphabet Inc. (GOOGL)
The Magnificent 7 stocks all deserve our attention given their significant weights in our equity benchmarks. But Alphabet (GOOGL) in particular may be the most important to watch in November, given its meager follow-through after earnings this week.
Alphabet has been building up an inverted head-and-shoulders bottoming pattern since August. The recent breakout above the neckline around $168 seemed to complete this pattern and indicate a high likelihood of further upside. On Wednesday, we saw a gap higher on earnings, but, by that day’s close, the stock was down by the lows of the day.
I’ve found that during bull market phases, breakouts tend to persist, as there are usually plenty of willing buyers interested in taking on additional risk for the possibility of greater returns. But, during bear markets, breakouts often will fail, as investors sell strength because they’re way more concerned with downside risk than upside potential.
Looking for the other seven charts to watch? Check out the full video on my YouTube channel!
RR#6,
Dave
P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!
David Keller, CMT
President and Chief Strategist
Sierra Alpha Research LLC
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.
David Keller, CMT is President and Chief Strategist at Sierra Alpha Research LLC, where he helps active investors make better decisions using behavioral finance and technical analysis. Dave is a CNBC Contributor, and he recaps market activity and interviews leading experts on his “Market Misbehavior” YouTube channel. A former President of the CMT Association, Dave is also a member of the Technical Securities Analysts Association San Francisco and the International Federation of Technical Analysts. He was formerly a Managing Director of Research at Fidelity Investments, where he managed the renowned Fidelity Chart Room, and Chief Market Strategist at StockCharts, continuing the work of legendary technical analyst John Murphy.
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