Now, the big news this month was the Fed's promise of "QE Infinity," an uber-aggressive monetary move that even the most bullish central bank watchers did not expect. That was supposed to keep stocks humming along, but what we saw in many stocks was a "sell-the-news" reaction to the Fed's aggressive juicing.
For some stocks, this sell-the-news turn of events resulted in the stage being set for a breakdown in the shares below key technical levels. From a trader's perspective, when a once high-flying stock begins a descent that takes it through its long-term, 200-day moving average, it's very often a clear signal that sellers have moved in for the long haul. If you are long a stock like this, you are definitely swimming against the stream.
Below are five big, widely held stocks sounding the technical "sell" alarm by recently falling below key support levels.
1. Occidental Petroleum (NYSE: OXY)
This oil company's shares have sold off sharply since mid-September, and that's taken the stock below its short-term, 50-day, and long-term, 200-day moving averages. Plunging petroleum prices were no doubt part of the catalyst for the selling here, and if this trend continues, then we are likely to see more pressure on Occidental Petroleum.
2. United Postal Service (NYSE: UPS)
The shipping giant's fortunes have become a barometer of global economic health, but since July, UPS shares have signaled a global economic malady. In late August, UPS shares sank below their 200-day moving average, and despite an early September bounce, the stock is back down to levels it hasn't seen since the beginning of the year.
One big driver sending shares lower is China's slowdown, a region where UPS has placed a thus-far losing bet on growth. Then there was the profit warning and lowered forecast for key competitor FedEx (NYSE: FDX), which sent UPS shares reeling as well.
3. Priceline.com (Nasdaq: PCLN)
The online travel site enjoyed a huge run higher through the first three months of the year, but since then, its shares have fallen out of favor in a big fashion. The spike in Priceline stock at the beginning of the year kept it trading well above the 200-day average until selling in early August put it back below this key technical support level.
If we see travel spending through the holiday season waiver, then Priceline will likely have a hard time booking an upward flight.
4. Nike Inc. (NYSE: NKE)
The marquee athletic footwear and apparel maker's shares fell sharply in June on struggling China sales, and perhaps due to the post-Olympic lull.
On Friday, we saw Nike shares gap down and open below their 50-day and 200-day moving averages on news that the company's fiscal Q1 net income fell 12% due to higher material costs and added labor costs. Along with the loss, traders are rightfully worried about China's slowdown, where Nike gets about 30% of its revenue.
5. Norfolk Southern Corp (NYSE: NSC)
Railroad stocks are often seen as bellwethers for the health of the domestic economy, and if you owned Norfolk Southern stock from June through mid-September, you may have felt downright optimistic about the direction the economy was headed.
Unfortunately, that optimism was derailed by the Sept. 20 announcement that the company will not meet analyst estimates for profits in Q3. The railroad operator cited reduced coal shipments and lower fuel surcharge revenue as the main reasons for the upcoming shortfall.
Traders punished the shares, sending them below both the 50-day and 200-day moving averages — and that's a technical pool you don't want to swim in.
Action to Take –> If you're long any of these stocks, then take the occasion of these technical breakdowns as a signal to sell these shares today.
– Jim Woods