Slap The Floor: Market Playing Defense

As the market consolidates at all-time highs there appears to be a shift in investor sentiment. While the momentum stocks have led the charge off the early February low, defensive stocks lagged behind.

Sentiment is now shifting the other way. While the broad market has failed to through on Wednesday’s rebound and is now in a free-fall, many defensive issues are in the green. Many are also on the verge of technical breakouts.

For example, Clorox CLX shares are trading higher by $0.44 at $87.23 in Thursday’s session. The issue, which has only rallied four points off its February low ($83.70), has been range bound over the last 18 trading sessions (including Thursday) between $85.89 and $88.11. So far, CLX has approached the upper-end of the range, reaching $87.94 on its first attempt at the critical resistance level.

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Another defensive issue in the green is Procter & Gamble PG. The issue is higher by $0.20 at $79.44 in Thursday’s trading. PG is over four points from its February low ($76.26) and has been range bound between $77.35 and $79.75 over the past 19 trading sessions, as well.

Interestingly, PG is on the verge of a major technical breakout, matching the high end of the trading range, reaching $79.74 earlier in the session. If PG can clear the institutional sellers at the $80.00, the chart really opens up to its January 24 high ($81.70).

Finally, Johnson & Johnson JNJ shares are off by $0.40 at $93.20 in Thursday’s trading. In contrast to other aforementioned issues, JNJ has rallied eight points from its February low ($86.09) and cleared out the institutional seller at the $94.00 level. Therefore, it may not have the same upside potential as CLX and PG.

If the rally does continue in JNJ, it will have to contend with the multiple highs at the $95.25 level, as well as the all-time high of $95.99.

Shift of Momentum

Meanwhile. the charts of a few of the momentum issues such Netflix NFLX, Tesla TSLA and Google GOOG paint a different picture.

All three issues, which had stealth rallies following its earnings results, are beginning to look tired. And with no potential driver (except analysts chasing price) for another three months, these issues may become subject to some profit taking.

NFLX has pulled back over 30 points from its all-time high of $458.00 and is on the brink of violating its Wednesday’s low ($429.68). If that level is breached along with the multiple lows at $425.00, the issue could easily decline to $400.00 and perhaps attempt to fill the gap ($334.44 to $377.49) from its earnings blowout.

TSLA, which has been the recipient of some bad press, has declined 27 points ($237.00) from its all-time high ($265.00). However, the issue remains seven points above its major support level at the double bottom from its Tuesday ($232.43) and Wednesday ($231.11) lows. Only the February 25 low ($228.45) stands between the minor support at $220.00 and the major support at $200.00.

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GOOG has been dormant for a long time; for the most part, it has been churning between $1200 and $1220 over the previous 19 trading sessions. Since making its run to the all-time high ($1228.88), the issue has been dipped under $1200.00 in the last three trading sessions (including Thursday) and is in danger of posting its second close in the last three trading sessions beneath this key psychological level.

If Wednesday’s low ($1184.19) is breached there are only minor support levels until the major support the February 6 low ($1147.55).

With momentum stocks beginning to weaken, defensive stocks perking up and earnings season behind us, the market will be relying on the “buy the dip crowd” to step in again and defend these critical support levels in these high-flying issues, which will come as no surprise.

However, if these levels give way, the broad market may very well relinquish much of its gains from its February low.