The near-term churning in Stock indices over the last month has been accompanied by a notable slowdown in momentum and market breadth as might have been expected when short-term uptrends morph into sideways consolidation. This slowdown resulted in 4100 having been tested twice now in the last few weeks, while defensive rotation took center stage as Technology underperformed. Long-term Treasury rates now look to be trying to bottom out, and this should adversely affect Technology even more in the weeks to come and is certainly quite important to watch carefully. In the short run, it’s tough to have much conviction on direction on a 2-3 day basis given that prices are right in the middle of a giant 200 point one-month range. It’s expected that any rally attempts up to 4100 should be sold, while declines under 3965 should bring about a retest and possible break of early December lows near 3918.
Top Technical laggards to avoid heading into 2023
Below I’ll discuss some of the popular technical breakdowns that have happened recently in a few stocks that have made these above-average technical laggards to avoid as the year draws to a close. These are based on a combination of poor technical structure, sub-par momentum, negative volume characteristics, lack of DeMark 13 countdown signals on various timeframes, not to mention bearish cyclical projections. These are 100% technically derived and subjective opinions which do not consider the fundamentals of the underlying issuer.
The first five stocks written up below in bold print will be added to my UPTICKS list. However, these will be added as technical stocks which I feel will move lower, not technical longs. Thus, it’s thought that the stocks below have a greater than average probability of declining in the weeks and/or months to come, not moving higher.
Areas of support and resistance will be mentioned below as guidelines only for those who wish to utilize these. As always, investment decisions and/or risk management is left to each individual investor. (Going forward, the act of moving above technical resistance targets will warrant either a discussion in a technical note where resistance will be raised, or the stock will be removed from the list.)
This table below highlights five technical laggards which will be discussed in the pages that follow:
GameStop (GME- $21.05)
Structurally, GME is on the verge of breaking down from a one-year consolidation as part of a nearly two-year downtrend that’s been in place since January 2021. Last week’s $22.63 weekly close represented the lowest weekly close since February 2021 and GME is in the process of testing lows made back in early 2022. Structurally, recent lows do not look likely to hold given the volume distribution on the downside in recent weeks, and a breakdown under 2022 lows at $19.40 looks likely in the weeks ahead. DeMark indicators remain premature towards thinking any kind of weekly or monthly low is approaching, and technical support lies at $16, or around 25% under current levels. Movement back above early December peaks is necessary towards thinking this decline might have run its course, and this lies at $27.87. At present, further downside looks likely for $GME into 2023.
Tesla (TSLA-$156.80)
TSLA maintains a very negative technical pattern which still argues for additional downside before this pullback has run its course. As weekly charts show below, the stock has broken down recently from a near two-year Head and Shoulders pattern, which happened back in mid-October just as the broader US Stock market was beginning to bottom out. Volume expanded on this decline and TSLA has just undercut the 61.8% Fibonacci retracement area of its run-up from 2019, and wave projections focus on support near $141, with additional levels not found until $111. This latter area represents an “Equal-wave” equality when comparing this most recent decline from September 2022 to the decline initiated back in November 2021 into May 2022. Overall, TSLA requires a rally back above $207 to argue that rallies are more likely on an intermediate-term basis, as such a move would allow this to recoup the area of its former breakdown. Bottom line, momentum is not oversold on a weekly nor monthly basis, and the path of least resistance remains lower for TSLA as 2022 is coming to a close.
Norwegian Cruise Lines (NCLH- $15.08)
The Cruiseliners have recently started to rollover after an above-average bounce off the June 2022 lows. While CCL is arguably weaker technically, the best risk/reward looks to be NCLH, which has just started to turn back lower following a more than 80% rally from June into November of this year. Interestingly enough, NCLH’s rally managed to peak at an exact area of trendline resistance from the existing 16-month downtrend from June 2021. Moreover, volume expanded dramatically following the recent break of November lows, and the violation of prior September peaks cements this rally from June as a three-wave counter-trend bounce. It’s expected that a final five-wave decline likely is underway that should test and break 2022 lows into Q2 of next year, which should result in NCLH pulling back to test and break $10.31 from June of this year. While a complete retest of 2020 lows at $7.03 might not be necessary, it does look likely that $10 can be tested and broken heading into this year. Thus, NCLH looks like a stock to avoid through Q2 of 2023, and it’s expected that lower prices are on the horizon.
Ollie’s Bargain Outlet Holdings (OLLI- $51.25)
OLLI stands out as being one to continue to avoid technically following the recent breakdown to new 2022 lows on above-average volume. While some expect this company to begin a recovery given its most recent return to sales and profit growth last quarter, technically this still looks to be an above-average candidate for underperformance. The stock has made scant progress since 2017, and it’s decline from 2020 peaks made nearly a complete roundtrip to retest early 2020 lows before its rebound attempt. Unfortunately, the breakdown in recent weeks represented a meaningful technical Negative structurally which should allow for 2023 weakness to retest and possibly break 2022 lows. Initial support lies at $37.67, but it’s thought that this level is likely broken on its way to $28.83 which would represent the lowest levels in over two years. Overall, volume has been far heavier on recent distribution days, and the structure of its recent decline from July should allow for weakness in the weeks/months to come. Bottom line, regardless of the fundamental picture, technicals suggest that $OLLI likely should move lower in the months ahead and that this remains quite early to buy.
Expedia Group (EXPE- $92.79)
EXPE looks likely to break recent consolidation lows as a tradable bottom does not appear to be in place just yet. Despite its stabilization attempts since June, more than six months ago, prices were unable to lift and participate in the 10%+ rally seen by the SPX in recent months. Volume has proven far heavier on down days, and its minor bounce into late November looks to have faded given last week’s decline back to multi-week lows. Pullbacks to challenge and break November lows near $85 look likely, with support on weakness not likely materializing until at least $74, but more likely near $61 which would represent a 50% alternate projection of the decline from last March. Overall, lower prices look likely into 2023 for $EXPE, and a push back to new yearly lows looks likely before this can bottom out.
