For the most part, investors walked away from Q2 earnings season here in the U.S mildly optimistic about the pace of the economic recovery. As of early September the S&P 500 was at all time highs, while the Nasdaq was at 14 year highs. While many stocks were at the highs when they reported Q2 and gave Q3 guidance, there were some that had been consolidating after a period of sideways action. There were a few breakouts that caught my eye in this period, which makes the price action over the last few days notable as they fill in a portion of the gap.
For instance, Baidu (BIDU) gapped on massive volume to new all time highs, but after a period of consolidating those gains, the stock has now filled in a good bit of the gap:
At today’s lows the stock had declined almost 10% from the recent highs.
Then there was Salesforce (CRM) which was not at highs when they reported in August, but had been consolidating for months in and around the mid 50s. The day following their fiscal Q3 results the stock had its biggest one day move after earnings in a year:
At today’s lows the stock was down almost 7.5% since Thursday’s highs, and filling in a good bit of the earnings gap.
And then there was Home Depot (HD), this one might have been the most impressive due to the shear size of the move in market cap terms, more than $10 billion in less than 2 weeks. This stock has yet to approach the actual earnings gap, but has given back almost 5% with the acknowledgement of the data breach:
And then lastly Under Armour (UA), in a similar camp to HD, but it has started to fill in a portion of the gap, with the stock now down 8% from Thursday’s new all time highs:
I guess the purpose of this exercise is to keep a close eye on some market leaders, and get at least an anecdotal sense for how committed longs are to stocks that have treated them very well of late. For those “buy the dippers” out there, all 4 of the above charts could represent healthy entry points on the long side at the prior breakout levels if the weakness continued without any stock specific news. But a failure below these levels could signify an important shift in sentiment at a time where many small cap issues have displayed relative weakness for some time.