Comcast Corporation (CMCSA) shares jumped more than 3% in the minutes following Wednesday's pre-market earnings release, lifting the communications giant back to the 50-day exponential moving average (EMA), which was broken earlier this week. The company beat profit expectations by a penny per share, while revenue rose 26% year over year, highlighting impressive growth that has benefited from domestic exposure during a period of worldwide trade tensions.

The stock has been a superior performer for years while paying out a modest yield that has now risen to 2.12%. Comcast announced a 10% increase in the 2019 dividend as part of the initial earnings release, underpinning the solid buy-the-news reaction. Even so, adverse cycles could now limit upside, setting the stage for a second tough year in a row after the stock posted a 15% negative return in 2018.

CMCSA Long-Term Chart (1990 – 2019)

Long-term technical chart depicting the share price performance of Comcast Corporation (CMCSA)

The stock fell to a two-year low at a split-adjusted 85 cents in 1990 and turned higher, entering a strong uptrend that topped out at $4.70 in 1993. The subsequent decline ended nearly three years later, yielding a second and more powerful uptick that caught fire during the internet bubble. Buying interest ran out of steam in the upper teens during the last week of 1999, posting a high that wasn't challenged for the next 13 years.

Comcast shares fell into the single digits when the bubble burst, bottoming out at $5.68 in October 2002, ahead of a limp recovery wave that stalled at the bear market's midpoint in 2003. A 2006 breakout made limited headway, topping out more than three points below the 1999 high in January 2007. The subsequent downturn accelerated during the 2008 economic collapse, while selling pressure eased at 2002 support in March 2009, marking a historic buying opportunity.

A bounce completed a round trip into the 1999 high in 2013, yielding an immediate breakout that attracted widespread buying interest. The rally's trajectory eased in 2014, but a long string of higher highs and higher lows continued into January 2018's all-time high in the mid-$40s. The stock broke a 14-month double top in March and bottomed out at the 50-month EMA two months later, completing the first test of that level since 2011. Unlike many issues, Comcast held above the mid-year low into year end, exhibiting resiliency that could eventually yield a fresh bull market run.

However, the monthly stochastics oscillator crossed into a sell cycle in December, predicting at least six to nine months of relative weakness that could keep the stock trading around the 50-month EMA into the second or third quarter. The sell-off into May also ended within 50 cents of the November 2016 low, highlighting the need for bulls to hold the line at $60 or risk continued downside that targets the January 2016 low in the mid-$20s.

CMCSA Short-Term Chart (2016 – 2019)

Short-term technical chart depicting the share price performance of Comcast Corporation (CMCSA)

The 100% retracement into the November 2016 low raises a red flag because it marks the first failure to maintain the long-term uptrend since the August 2015 mini flash crash dropped into the October 2014 low. This failure's longer 18-month cycle could be meaningful, but bulls will remain in charge until the 2018 low gets tested, which appears likely in the coming months. They need to hold that level at all costs because a breakdown would confirm a multi-year downtrend.

The on-balance volume (OBV) accumulation-distribution indicator lifted to a new high with price at the start of 2018 and turned sharply lower, bouncing in May. Flatline action into 2019 signals a holding period that is attracting little sustained buying or selling interest. A breakout above the mid-year high could offer an early buying signal with this pattern, while a breakdown through the December low would presage much lower 2019 prices.

The Bottom Line 

Comcast stock has bounced back to the 50-day EMA after an upbeat earnings report and could add to gains in the coming weeks. However, adverse cycles suggest that hidden headwinds will keep many bulls on the sidelines into the second quarter.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.