Brief Technical Analysis: Komatsu, HCM and CAT Tactical Recovery Targets and Macro Pivot Support and more

In this briefing:

1. Komatsu, HCM and CAT Tactical Recovery Targets and Macro Pivot Support
2. U.S. Equity Strategy: Nearing Short-Term Overbought Extremes
3. US 10yr Triangle Geared for a Power Breakout
4. Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues
5. Petrochina Breakout and Laggard Play

1. Komatsu, HCM and CAT Tactical Recovery Targets and Macro Pivot Support

We thought a technical view on these counters would help clarify where tactical rally targets come into play as well as more important macro support levels where a basing process is expected to begin.

Key resistance points can be used as short zones with key pivots stops and limit levels that reign in risk.

All three stocks display varying degrees of a macro descending corrective wedge formations that have yet to fully mature. 

CAT stands out as the more buoyant of the group and faces its own set of upside pivot resistance points with solid macro support to work with on weakness.

We wanted to fold in a technical view with Mio Kato, CFA and his insight Komatsu, HCM, CAT: The Stock Punishment Does Not Match the Outlook Deterioration Crime . This group may be ahead of the earnings curve and why we may see more gas in a corrective bounce cycle (CB easy policy and the hunt for value may be part of the rally) before more pressure points are hit to re test macro support targets.

2. U.S. Equity Strategy: Nearing Short-Term Overbought Extremes

Positive news surrounding trade and dovish Fed rhetoric has continued to flow, resulting in a reversal from December’s oversold extremes to our current, overbought extremes according to the S&P 500’s percentage of stocks above their 50-day moving average (see chart below). We continue to believe the market is going through a bottoming process, and we prefer to be on the cautious side at current levels considering how far and how quickly the market has risen. 

In today’s report we highlight attractive stocks within Materials and Technology: large- and small-cap gold, silver, platinum, and optical equipment companies.

3. US 10yr Triangle Geared for a Power Breakout

Our macro stance touted a bearish yield scenario from 3.26% and again once below 3% with a target of 2.62% and has since been revised lower. Recent yield fade call from 2.80% targets much lower yields and will have a ripple effect globally.

A fresh plunge in yield would favor rate sensitive assets and warn of a harder slow down cycle. The bond market is pounding the table that global growth will slow more dramatically than what is currently priced into market and equities.

The offset is clearly a more dovish CB tone, China stimulus and closing in on sentiment capitulation.

Triangulation breakout will offer a powerful trade. Yields are set for a big move.

4. Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed.  In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.

5. Petrochina Breakout and Laggard Play

Petrochina Co Ltd H (857 HK) has remains suppressed but with oil perking up there is a laggard upside play taking shape as we begin to see distribution in HK upside leaders. On weakness we like positioning on the long side and can be used as a pair with an index short or one of the steel counters.

Given stock leaders are showing deteriorating upside momentum, we expect laggards to attract more attention.

RSI and MACD breakout patterns outlined as well as the price breakout at 5.10.

A bigger descending wedge also shows promise as a secondary breakout trigger.

MACD pattern resistance will help define the trending capability post breakout.