Stock Selection (US shares): CME resilient against bearish backdrop

CME Group may continue to outperform the S&P 500

CME Group (CME)



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Key technical elements

  • CME Group, a major options and futures exchange that offers a whole spectrum of financial and commodities derivatives instruments has continued to buck the trend of the general stock market where its share price is up by 4.3 % from 01 May 2019 till yesterday, 14 May U.S. session close versus a loss of -4.7% seen in the S&P 500 over a same period.
  • Medium-term momentum remains positive for CME since its bullish break above its descending trendline resistance from its 19 Nov 2018 all-time high on 09 May 2019. The daily RSI oscillator continues to hover above its corresponding support at the 49 level and still has further room to manoeuvre to the upside before it reaches an extreme overbought level of 73.
  • The key medium-term support rests at 176.50 which is defined by the pull-back support of the former descending trendline resistance from 19 Nov 2018 and the 61.8% Fibonacci retracement of the recent rally from 06 May 2019 low to 14 May 2019 high.
  • Relative strength analysis from the ratio of CME Group against the S&P 500 ETF (SPY) has continued to exhibit medium-term strength/overperformance
  • The 30-day Person correlation coefficient between the movement of the S&P 500 and CME Group is showing a weak direct correlation link of 0.28. This observation suggests that CME Group is a low beta stock where its past share price movement is not highly dependent/sensitive on the past movement of the general market, the S&P 500.

Key Levels (1 to 3 weeks)

Intermediate support: 179.57

Pivot (key support): 176.50

Resistances: 188.45 & 195.60/197.08

Next supports: 171.00 & 159.36/155.40

Conclusion

If the 176.50 key medium-term pivotal support holds, CME Group may see a continuation of its impulsive up move to target the next resistance at 188.75 follow by its current all-time high area of 195.60/197.08

However, a daily close below 176.50 negates the bullish tone for a slide to retest 06 May 2019 low of 171.00. Only a close below 171.00 opens up scope for a corrective decline phase towards the major support zone of 159.36/155.40 (also the primary ascending trendline support from Jan 2016 low).

Charts are from eSignal 



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