3 Big Stock Charts for Friday: CVS Health Corp (CVS), Goldman Sachs Group Inc (GS) and Microsoft Corporation (MSFT)

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The market prepares to head into a seasonally poor period as next week kicks off the month of August trading.

Since 1990, August has been the worst month of the year according to average returns of the S&P 500 Index, meaning it may be time to either lighten up or short a few stocks that have charts suggesting short-term bearish activity is lurking.

Among the names on our technical radar are CVS Health Corp (NYSE:CVS), Goldman Sachs Group Inc (NYSE:GS) and Microsoft Corporation (NASDAQ:MSFT), all of which are showing signs that short-term bearish trends are likely to take prices lower.

CVS Health Corp (CVS)

160729 CVS Price Chart

CVS stock has been a market laggard for the year as its shares have declined by more than 3% against the S&P 500 gains of more than 7%. The underperformance comes despite positive fundamentals that show year-over-year revenue growth and an earnings surprise last quarter.

Overbearing technical resistance has driven CVS share prices lower as the 50- and 200-day moving averages for the stock have suppressed a number of short-term rallies; and more recently the 50-day moving average move below the 200-day signals a “death cross” pattern that is historically bad for stocks over the intermediate-term outlook.

The most recent retreat from trendline resistance has pushed CVS shares down to their recent lows around $92.50, of which a break below will likely draw more sellers into the market. While CVS stock is currently residing in technically oversold territory, according to its RSI, the momentum indicators are suggesting that there is further downside potential.

Goldman Sachs Group Inc (GS)

160729 GS Price Chart

Since announcing earnings results that failed to impress the Street, Goldman Sachs’ shares have been struggling to maintain a tight trading range between $160 and $165. The banking giant’s stock rallied more than 13% in July, expending a lot of buying power and leaving the stock to hang in suspension just below the restriction of its 200-day moving average which has been on the decline since December.

Goldman stock, like other large financials, has been in a long-term pattern of lower highs and lows since peaking more than a year ago, indicating that the technical traders are in firm control of prices by taking advantage of the charts.

The short-term rally in Goldman Sachs’ stock nearly registered a short-term overbought reading from its RSI and its MACD is indicating a shift in momentum that should once again put sellers in control of its price. For now, the short-term technical suggest that Goldman Sachs’ is likely to challenge the $140 level and if broken, have a short-term price target of $120.

Microsoft Corporation (MSFT)

160729 MSFT Price Chart

Success can come with a cost, and for now the cost may be profit-taking on Microsoft shares after the company’s stock rallied nearly 20% over the last month. The fast and furious rally was capped by a positive reaction to earnings, pushing Microsoft shares just above the top of their recent range to $57, just short of all-time highs from 1999.

Like many of the stocks on our list, Microsoft stock registered some overbought readings when it peaked earlier this week, signaling that the buyers are likely growing tired. While still positive, the MACD for Microsoft stock is showing signs of wear as well as a reversal in momentum is beginning to develop.

For now, a pullback in Microsoft would be little more than a healthy regression to the mean, and likely an opportunity for investors that have missed out on the long-term rally in the shares to pick up the stock at a value compared to recent prices. Look for potential support at the 452.50 level, but for now the smart money is locking-in their gains on the technology giant.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities. 

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