We recently talked about how one area of the market that could see additional fallout from the fiscal cliff is dividend stocks. While some dividend stocks will likely remain strong – Philip Morris (NYSE:PM) is at the top of the list – there are definitely some opportunities to play the bearish side in dividend stocks. In this video, we look closely at the chart for one put-play candidate.
Duke Energy Corp. (NYSE:DUK) is one of the biggest out there. You can see that performance-wise it’s not doing as well. If you look at utilities, they’re a strong, consistent performer, but Duke isn’t a growth company like Philip Morris or Verizon (NYSE:VZ) or GameStop (NYSE:GME) or the other classic dividend payers.
So, we start to look at DUK, which has a very strong level of resistance roughly equally to the nadir between the double top that appeared in the June/July/August timeframe. The stock is back up to the resistance level, and there was a lot of selling after the election because everybody knew with President Obama being reelected, we probably need to get more pessimistic about the outcome for the fiscal cliff.
That can present some interesting opportunities. I’m going to be a little “loosey-goosy” with my definitions, but looking at DUK’s chart, it made a candlestick pattern and if we saw a decline, we’d say that’s a pretty bad sign. It’s not a doji, but if we see a gap down in DUK and a little bit of selling, it might trigger an entry opportunity for us with puts, and I’d make an argument it’s a shooting star, or at least the sentiment behind it was the same as a shooting star, which tends to be a fairly bearish signal, especially when it appears at a resistance level like we are right now.
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