Stocks are Overbought Entering the Seasonally Weak Month of June - Chaikin Analytics

Stocks are Overbought Entering the Seasonally Weak Month of June

Stock of the Day: Take-Two Interactive (TTWO) – Bullish Rating

Take-Two Interactive (TTWO) has a Bullish Chaikin Power Gauge Rating and has been leading the SPY since March. The stock is just entering an oversold position and Chaikin Money Flow is bullish. TTWO is above the rising long-term trend line and has price-based support in the $125 – $130 zone. The 21-day ATR currently stands at $5.28

The Chaikin Power Gauge Rating for TTWO is Bullish due to very strong earnings performance, very strong price/volume activity and positive expert activity. The stock also has poor financial metrics. TTWO’s earnings performance is very strong as a result of high earnings growth over the past 3-5 years and consistent earnings over the past 5 years.

Pre-Market Movers

Advancers: COTY (6%), ADT (5%), TRIP (4%), ZNGA (4%), GPS (4%)

Decliners: EXC (21%), ACC (11%), PFE (5%), CNP (5%), EHC (4%)

Monday’s Macro Market Trends


SPDR S&P 500 ETF (SPY) closed above the important $300 level that we have been highlighting in our notes for the past few weeks. Interestingly, the fund is now lagging the IWV (Russell 3000 ETF) in a sign that smaller names in the market are beginning to join the rally in equities. Chaikin Money Flow is slightly bullish and SPY is above the long-term trend line. 

We have noted that a move above the $300 mark opens the door to a move to the $311 level. Last week’s high of $306.83 took the fund to within 1.35% of this level which we have been highlighting.

My concern now is that the SPY is overbought based on our indicator. A pullback to support in the $285 – $295 range (which holds the gap from May 18th) can’t be ruled out. Holding this level, should a pullback ensue, would be key to keeping the uptrend from the March lows intact. Should that pullback also be met with an oversold condition, it would present an opportunity to add bullish ideas to the portfolio. A break below the $285 mark would make a move to the $265 – $275 range probable.  

Small Caps

The iShares Russell 2000 ETF (IWM) has a Neutral + Chaikin Power Gauge ETF Rating and continues to underperform the SPY but the intensity of underperformance has diminished of late. The OB / OS Indicator is now in an overbought position and Chaikin Money Flow is bullish. The fund is above the long-term trend line and the Power Bar Ratio is bullish. 

IWM has resistance in the $145 – $150 range. On the downside, there is first support in the zone between $120 and $130. Further improvement on the part of small caps would be a sign that participation in the market’s rally is broadening and would increase the odds that it continues. 

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