Four Vulnerable Income Stocks

05/04/2015 10:15 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

With the continued fear over higher yields, MoneyShow’s Tom Aspray takes a technical look at four income stocks that look especially vulnerable to further declines after last week’s trading.

The sharp rally last Friday limited the weekly losses in the Dow Industrials and the S&P 500. The social media stocks bore the brunt of the selling and several others will report their earnings this week.

Given the weak GDP report last week, this week’s focus will be on the monthly jobs report. In Friday’s Week Ahead technical review, I pointed out that last week’s correction stopped right where it needed to in order to avoid more technical damage.

The weakness is especially evident in the small-cap averages so it is important that the rally continue in impressive fashion this week. The futures are higher in early trading, but it is the close today that will be important.

With the continued fear over higher yields, these four income stocks look especially vulnerable to further declines after last week’s trading.

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Chart Analysis: Equity West Capital (EQR) is a $27.2 billion REIT that has a yield of 2.75%. They reported misses on earnings and revenues last week.

  • EQR is 9.4% below its 52-week high but is still up 4.85% YTD.
  • The weekly chart shows that last week’s low was below the March low of $74.31.
  • The monthly pivot support is at $69.56 which is very close to the weekly starc- band.
  • The uptrend is a bit lower in the $69 area.
  • The relative performance did not make a new high with prices in March.
  • The RS broke its support, line b, before the final high and has now formed lower lows.
  • The weekly OBV also formed a negative divergence at the recent highs, line c.
  • The OBV has formed lower lows and is well below its declining WMA.
  • Near term resistance at $76.11 and the 20-day EMA.

Kimco Realty Corp. (KIM) is a $10 billion REIT that focuses on shopping centers and has a current yield of 3.84%.

  • The close last week confirmed a downtrend as KIM is down 2.59% YTD.
  • The weekly starc- band is at $23.40 with the uptrend, line c, at $22.80.
  • There is more important support in the $21 area.
  • The relative performance has completed a top after breaking support at line f.
  • The RS line is now well below its declining WMA.
  • The OBV appears to be topping out as it is just below its WMA.
  • It shows no sharp increase in downside momentum.
  • There is weekly resistance now in the $25 area with the 20-week EMA at $25.59.

Next Page: A Utility and a Cigarette Manufacturer Stock to Watch

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Pinnacle West Capital (PNW) is a $6.7 billion electric utility that has a current yield of 3.89%. They missed on earnings and revenues last Friday.

  • The close last Friday was below the prior eight week lows.
  • The monthly pivot support is at $58.55 with the weekly starc- band at $57.29.
  • There is longer-term support, line a, in the $54 area.
  • The RS line peaked with prices in early 2014 and dropped below its WMA two weeks after the high.
  • The relative performance has now broken more important support at line b, as it is leading prices lower.
  • The OBV closed below its WMA last week and appears now to be rolling over.
  • There is weekly resistance now at $61.50 with the flat 20-week EMA at $63.03.

Altria Group (MO) is a $99.6 billion cigarette manufacturer that has a yield of 4.03%. It was up 1.2% last Friday and is up 3.88% YTD.

  • The weekly close was below the doji low of $51.55 so an LCD sell signal was generated.
  • The next support is at the March low of $49.03 with the weekly starc- band at $47.40.
  • This coincides with the monthly pivot support at $47.40.
  • The RS line dropped below its WMA on March 13, which was two weeks after the high.
  • The relative performance has now broken support at line c, signaling that MO is underperforming the S&P 500.
  • The weekly OBV is still holding above its WMA which is starting to flatten out.
  • The declining 20-day EMA is at $51.46 with monthly resistance at $52.18.

What it Means: These four stocks have violated weekly support and their relative performance has also broken down and formed lower lows. The RS analysis often leads prices lower so these four stocks are likely to decline further.

How to Profit: No new recommendation.

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