Gene Inger’s Trading Notebook: Why retailers like Nordstrom, Walmart and Home Depot are flat a...
2 Tech Giants with Ugly Charts
12/04/2012 10:20 am EST
The monthly charts of two tech giants have deteriorated further, says MoneyShow’s Tom Aspray, and despite their attractive yields they are likely to underperform the S&P 500.
The surprisingly weak ISM Manufacturing Report Monday helped the stock market give up the early gains and close lower. This is likely the start of the expected correction that should take the S&P 500 cash to the 1395-1400 and the Spyder Trust (SPY) back to the $140 area.
I will be watching the extent of the pullback in the PowerShares QQQ Trust (QQQ) as it should find support in the $64.40-$65 area. A sharper correction will likely mean that Apple Inc. (AAPL) will not hold the support at $572 and may drop back to the stronger support in the $560-$564 area.
In reviewing the monthly charts of all 30 Dow stocks for my regular monthly column I noticed that the monthly charts of two tech giants had deteriorated further. Both are within 10% of their monthly starc- bands so a rebound is likely over the next month or so, but the longer-term charts then project even lower prices for these two widely followed tech pioneers.
Chart Analysis: Intel Corp. (INTC) has had a rough year as it closed 2011 at $24.25 and is now down 19.6% for the year. It is already close to the 2011 low of $19.16, which if broken would put most of the buyers from the last two years at a loss (More on yearly ranges).
- The close below the monthly uptrend, line a, totally negates the positive monthly breakout from October 2011.
- The 50% Fibonacci retracement support was broken in November with the 61.8% support at $18.68. Below this is the August 2010 low of $17.60.
- The monthly relative performance or RS analysis broke its uptrend, line b, at the end of June and its WMA the following month.
- The RS line had confirmed the highs in early 2012.
- The monthly OBV also confirmed the high at $29.27 (line d), but the volume has increased each of the past three months.
- The OBV dropped below its uptrend (line e) and its WMA in October.
- There is monthly resistance now at $22.54 to $23.17.
The weekly chart of Intel Corp. (INTC) shows that the uptrend, line g, was broken three weeks ago.
- The mid-September drop below the support from the early 2011 highs, line f, was a sign of weakness.
- The weekly relative performance started to look toppy in the latter part of August as it turned lower after rebounding back to its declining WMA.
- The RS line has now dropped blow the 2011 lows, line h, which suggests a drop back to the $17.60 level.
- The weekly OB V did not form any negative divergences at the early 2012 highs but the failing test of its WMA in August (see circle) was negative.
- There is initial resistance now at $20.50 and then at $21.60 with the declining 20-week EMA at $22.31.
NEXT PAGE: No Signs of Bottoming for Either Stock |pagebreak|
Microsoft Corp. (MSFT) closed November back below the support, line a, from the 2011 highs. MSFT is still trading above the 2011 close at $25.96. It is up a slight 2.5% for the year, which is considerably worse than the SPY.
- A close near current level would cause the formation of a “gravestone doji” on the yearly charts.
- The monthly uptrend, line b, is now just above $25 with additional monthly support in the $23.60 to $24.30 area.
- The uptrend in the monthly relative performance, line c, was broken in June.
- The failing rally in the RS line last August (see circle) confirmed that the relative performance had topped.
- The monthly on-balance volume (OBV), unlike prices, did not breakout to new highs in early 2012 and has now dropped below support at line d.
- There is monthly resistance now at $30.20-$30.25, the highs of the past two months.
The weekly chart shows that Microsoft Corp. (MSFT) is now just above the 38.2% Fibonacci retracement support at $25.95 that goes back to the 2009 lows.
- Once below the trend line support, line e, the 50% support is at $23.98.
- The weekly relative performance violated its uptrend, line f, last July and then formed a series of lower highs and lower lows.
- The RS line dropped sharply last week and shows no signs of bottoming.
- The weekly OBV dropped to new lows for the year in October as support, line g, was broken.
- There is first weekly resistance at $27.80 with further at $28.80 and the declining 20 week WMA.
What it Means: A further correction in the stock market should provide a buying opportunity in those stocks or ETFs that are outperforming the S&P 500 or Spyder Trust (SPY). It is important that the new buying be done near good support levels where reasonably tight stops can be used, in case the correction is deeper than I expect.
These two tech giants are acting weaker than the overall market and show no signs from either the monthly or weekly analysis that they are bottoming. They are likely to rebound if the market gains strength going into the end of the year, but it should be an opportunity to sell. While Intel Corp. (INTC) yields 4.6% and Microsoft Corp. (MSFT) yields 3.5%, these attractive yields could easily be offset by a similar drop in their stock price.
How to Profit: No new recommendation
Related Articles on STOCKS
When we recommended pharmaceutical giant AbbVie (ABBV) this past June, it had recently raised its qu...
Eli Lilly (LLY) manufactures drugs to treat pain, diabetes, and cancer. It also produces animal heal...
Verisk Analytics (VRSK) has broken out of a nine-week, classic double bottom base. The move carries ...