The S&P 500 is on a roll. It is moving steadily to reclaim its high for the year. Most of the market's optimism is from the expectations of a potential soft landing due to cooling growth. The continued optimism has also pushed some stocks into long-term bullish territory when they crossed their 200-day SMA. The 200-day SMA is perceived by traders and investors as a long-term indicator and the last line of defense when looking at its long-term trend, and when a stock crosses above it, it could signal that a new trend is emerging.
While some may argue that the 200-day SMA is a bullish signal and signals a change in trend, it's not always the case. Keeping a close watch on stocks that move above their 200-day SMA puts you in a position to take advantage of the opportunity when price action and buying pressure confirm the reversal of the market’s sentiment.
This article will look at three stocks that recently crossed their 200-day SMA and are now exhibiting strong bullish signals. Investors and traders can take advantage of these signs before the rest of the market hops on the new trend.
Eastman Chemical Company (EMN)
Eastman Chemical Company is a specialty materials company that produces polymers, films, plastics, and industrial chemicals for use in electronics, medical, agriculture, and construction industries. The company serves customers globally and is a pioneer in many advanced materials and innovative solutions. It has been making strides in innovation by further developing solutions for sustainable packaging. The company is also partnering with Ostium Group Partners to incorporate sustainable packaging into medical devices.
Is now the time to buy Eastman Chemical Company?
EMN closed above its 200-day SMA(green line) after bottoming out and reversing from its low. Its 14-day RSI is currently in the overbought zone, signaling that prices may be correct. Investors looking to buy into EMN can wait for the price to stay above the 200 SMA and establish its support there. However, investors should consider the possibility of correction around its immediate support in the $78.00 area.
The Southern Company (SO)
The Southern Company is a holding company in the electric power industry. It holds all common stocks of Southern Power Company and Southern Company Gas. The Southern Company operates Mississippi Power, Alabama Power, and Georgia Power as public utility companies serving retail customers in the Southeast. It also distributes natural gas to customers in Virginia, Georgia, Illinois, and Tennessee via its gas distribution utilities. Moreover, the company recently made two acquisitions: the South Cheyenne Solar Facility and the Millers Branch Solar Facility.
Should you be cautious about Southern Company?
SO closed above its 200-day SMA and is trading within a tight range between that and $71.80. Volume supports the price increase, and RSI is currently in its bullish area. Investors looking to buy into SO can wait for prices to stabilize above their SMA or the price to take out their resistance. It all boils down to how aggressively you want to take a position in SO. Would you want to buy in early, scale into the positions, or wait for a breakout and confirmation?
Elevance Health, Inc. (ELV)
Elevance Health, Inc. is a health insurer that operates in four primary segments: Health Benefit for its health plans for employer groups, individuals, and federal employees health benefits (FEHB) program members; Carelon Services for healthcare-related services such as integrated care delivery, behavioral health, etc.; CarelonRx for its pharmacy business; and Corporate Services. The company recently announced its partnership with AAMD to help and support the adoption of IDD training in mainstream medical practice. The company is also recognized as one of the top 100 companies to work for.
Should you be bullish on Elevance Health?
ELV closed above its 200-day SMA for the second time this quarter, potentially suggesting a change in trend. Its 100-day SMA(yellow line) shows it is starting to slope upwards slowly, and the medium-term trend may be bullish. Investors looking to buy into ELV can either wait for prices to trade and close above the 200-day SMA for confirmation or wait to establish short-term support.
Final Thoughts
The 200-day SMA is one of the indicators closely followed by long-term traders and investors. It helps provide the market's sentiment on a particular security. However, this is just one of the many ways to view the sentiment of specific stocks. Investors and traders should still conduct due diligence to ensure proper risk management in each trade.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
