Small caps have been the clear favorite this week, with the Russell 2000 up 1.3% compared to 0.6% for the Dow Jones Industrial Average and 0.5% for the S&P 500.
In this environment, the Profit Scanner powered by Recognia has found several large-cap stocks with a weak technical outlook.
Here are four such large-cap stocks that bulls should avoid for the time being — or that bearish traders should consider exploiting for downside profits.
4 Large-Cap Stocks Setting Up for a Drop: Under Armour (UA)
Click to Enlarge Under Armour (UA) seemed to have nowhere to go but up for much of this year, peaking at the $88 level in mid-April — until its quarterly report showed that net income fell 13% year-over-year. UA stock has been stalled out around $78 since then.
On Tuesday, the Profit Scanner spotted two bearish signals on UA’s chart.
One was a pattern called the bearish Inside Bar, in which the latest trading range is completely within the prior bar. This signals that bulls are beginning to lose ground to the bears, and we could see lower prices in the short term.
In the chart, you can see both the Inside Bar and Tuesday’s other bearish signal: a cross below the 21-day moving average. Since this is a short-term moving average, it suggests further downside for UA is just around the corner.
4 Large-Cap Stocks Setting Up for a Drop: Palo Alto Networks (PANW)
Click to Enlarge Cybersecurity firm Palo Alto Networks (PANW) has also been favored by bulls this year, but the technicals suggest that may be coming to an end.
On Tuesday, PANW showed a bearish Engulfing Line pattern, suggesting that selling pressure has overwhelmed previous buying pressure. You can see the pattern in the chart, which is made up of two candlesticks in which the black real body of the second overtakes the white real body of the first candlestick.
The same day, PANW’s Relative Strength Index (RSI) turned short-term bearish as well. The RSI indicator compares up periods to down periods, in order to spot when the stock crosses into overbought or oversold territory.
In this case, PANW is coming down from the 70 (overbought) level, which further supports the idea that bulls are losing traction.
4 Large-Cap Stocks Setting Up for a Drop: Pfizer (PFE)
Click to Enlarge Next up is Pfizer (PFE). Big Pharma has been riding high for months, and Pfizer has been no exception — but this week it is showing signs of slipping. The stock kicked off June with a bearish Inside Bar pattern, as seen in the chart.
As discussed with UA, the bearish Inside Bar suggests that more sellers are beginning to show up, giving the bears a little more control than they previously had.
Then, on Tuesday, Pfizer’s Commodity Channel Index turned short-term bearish. Like the RSI, the Commodity Channel Index essentially measures whether a stock is oversold (-100) or overbought (+100). With the indicator turning lower from the +100 level, it shows that PFE is trending lower out of overbought territory.
4 Large-Cap Stocks Setting Up for a Drop: Starz (STRZA)
Click to Enlarge Starz (STRZA), which recently overtook Showtime as the No. 2 premium cable network (behind Home Box Office), is also showing signs of short-term weakness. STRZA has put in a series of bearish signals this week: two events on Monday, from the Commodity Channel Index and a bearish Engulfing Line Pattern, and two more on Tuesday.
One of these most recent bearish events came from the MACD. This indicator compares the stock’s 12-day moving average to its 26-day moving average, and a positive reading indicates bullish momentum. But when the MACD crosses below its own moving average, it suggests that it is trending lower — a short-term bearish signal.
STRZA’s RSI indicator shows that it is falling out of overbought territory, further evidence that Starz could move lower in the near term.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
