3 Blue Chips on Thin Technical Ice

by Serge Berger | May 2, 2013 10:34 am

3 Blue Chips on Thin Technical Ice

The Dow Jones Industrial Average is up by a little more than 12% year-to-date and still very close to the all-time high of 14887.50 set back on April 11. As such, I think it’s a good time to scan the index for components that are sitting on thin support that, if broken, could lead to a quick slide lower. To broaden out the selection somewhat more, I have focused on three different industries.

My search came up with three blue-chip stocks with shaky technical foundations. Here’s a look:

Hewlett-Packard

hpq 300x197 3 Blue Chips on Thin Technical Ice
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First up, Hewlett Packard (NYSE:HPQ[1]) — a member of the technology sector.

After a vicious decline off its April 2010 highs, HPQ finally found a bounceable bottom in November 2012, from where it proceeded to rally 110% in 4.5 months, topping out on April 1 of this year. The recent slide off the highs brought the stock below its November 2012 uptrend, as well as its 50-day simple moving average. Additionally, over the past 10 trading sessions, HPQ developed a so-called bear-flag pattern, which as the name suggests, usually resolves to the downside.

A break below $19.50 could get Hewlett-Packard moving toward its 200-day simple moving average around $17.30.

Procter & Gamble

PGdaily 300x221 3 Blue Chips on Thin Technical Ice
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Next up, representing the consumer staples space is Proctor & Gamble (NYSE:PG[2]). Since the stock’s post-earnings drop April 24, it managed to consolidate right above the key diagonal support line near $76.30. The consolidation form here is also taking the shape of a bear flag formation.

In short, should PG drop below the diagonal support line — and thus also out of the bear flag formation — the stock likely will accelerate to the downside.

Pfizer

pfe 300x216 3 Blue Chips on Thin Technical Ice
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Last but not least, here’s a look at pharmaceutical giant Pfizer (NYSE:PFE[3]).

The stock’s November 2012 uptrend remains intact, reinforced by its 50-day simple moving average. The stock’s steep angle of decline off its April highs increases the odds that the stock will eventually slice through this layer of support (around $28.80-$28.90).

If it does, downside acceleration should increase, and PFE could fall at least 5% before next support.

For a quick recap of these picks and one more, check out this video[4].

Serge Berger is the head trader and investment strategist for The Steady Trader[5]. Sign up for his free weekly newsletter here[6].

Endnotes:
  1. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  2. PG: http://studio-5.financialcontent.com/investplace/quote?Symbol=PG
  3. PFE: http://studio-5.financialcontent.com/investplace/quote?Symbol=PFE
  4. check out this video: http://investorplace.com/2013/05/video-another-dow-stock-on-shaky-ground/
  5. The Steady Trader: http://thesteadytrader.com/
  6. free weekly newsletter here: http://forms.aweber.com/form/42/1636996642.htm

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