The Top 10 Must-See Stock Charts for October

Is the more recent “growth scare” for real this time, or just another false alarm?

That’s the question on many investors’ minds as we move into October, which — in case you haven’t heard — has wreaked havoc on the stock charts over the years.

Periods of weaker-than-expected economic data are nothing new. Throughout the recent stages of this bull market, there have been periodic interruptions to stocks’ upward trajectory as investors have paused to reassess the growth outlook. The most recent occurred in January, when the markets grew worried about the Chinese economy.

Now, the main concern is the possibility that Europe could be sliding into a deflationary spiral. This time, however, the situation might be more perilous than in other selloffs due to narrowing market leadership and the recent technical breakdown in the small-cap Russell 2000 Index.

Investors should therefore be on the lookout for opportunities to capitalize on additional weakness in the broader market. With that in mind, here are 10 stock charts that demonstrate the potential for beta on the downside if the market indeed hits rougher seas in October.

Stock Charts to Watch: Vanguard FTSE Europe ETF (VGK)

The Vanguard FTSE Europe ETF (VGK) represents one of the most critical stock charts for the market right now, which makes it not just a potential trading idea but also an important indicator.

The most recent selloff in the VGK ETF has brought it almost back to the $55 level that has served as support and forms the bottom of dangerous triangle formation. The ETF has been trading under its 200-day moving average for nearly two months, and it recently suffered a “death cross” (or a move in its 50-day below the 200).

If VGK can’t hold support, it will be a clear indication that the outlook has become more bearish for the European markets. Further, it will preview a breakdown in the iShares MSCI EAFE ETF (EFA), which has a similar formation but is further away from support.

This week might bring a decisive move in either direction for European stocks, as European Central Bank chief Mario Drahgi is expected to provide an update on the status of the region’s monetary policy after the ECB governing council meets Thursday.

stock charts VGK

VGK, 1-Year

Stock Charts to Watch: Valero Energy (VLO) and HollyFrontier (HFC)

Refining stock Valero Energy (VLO), while a big winner in 2013, now appears to be on the verge of a breakdown. The stock is sitting right at support, below which it will violate the neckline of a broad head-and-shoulder pattern. Two factors making the case that it will indeed break down are the fact that the stock has suffered a death cross, as well as the pick-up in volume in the recent downdraft. VLO stock tends to overshoot in both directions, so traders should keep a close eye on this chart to capitalize on a possible acceleration to the downside.

stock charts VLO

VLO, one-year chart

Valero isn’t the only refining stock nearing perilous territory. HollyFrontier (HFC), at Friday’s close of $44.52, is nearing support at $43. Below this level, it’s a clear shot down to the next support line at $40. Watch VLO to gauge the likelihood of a break in HFC stock, since VLO is closer to its support and therefore in a position to offer an indication of whether HFC will be able to hold at $43.

stock charts HFC

HFC, two-year chart

Stock Charts to Watch: Chesapeake Energy (CHK)

Elsewhere in the energy sector, the chart of Chesapeake Energy (CHK) speaks for itself. At $23.50, CHK stock is approaching support at $22.62, below which the next support doesn’t occur until $22. Like Valero, Chesapeake has made a death cross and has moved beneath its 200-day.

stock charts CHK

CHK, one-year chart

Those interested in the energy space should also watch Cabot Oil & Gas (COG), which broke down last week but traded back to support at $32 on Friday. COG’s behavior around this level might provide a hint of what’s next for Chesapeake.

Stock Charts to Watch: SPDR Gold Shares (GLD)

Gold has been punished this quarter — returning -8.5% since the end of June — but its performance could become uglier still. At Friday’s close of $117.06, the SPDR Gold Shares (GLD) is approaching support at $114.46, below which there hasn’t been any trading volume since 2010. In turn, this would spell even more trouble for the Market Vectors Gold Miners ETF (GDX) and individual stocks such as Barrick Gold (ABX). For more information on this front, check out this full analysis of the technical picture for both gold and precious metals stocks.

GLD, 2-Year

GLD, two-year chart

Stock Charts to Watch: Caterpillar (CAT)

Caterpillar (CAT) is another stock that has run out of room to fall. CAT closed last week at $100.38, which represents a break of its 200-day moving average and puts the stock right at its support line. As shown via the volume-by-price bars in the accompanying chart, CAT stock has little volume support to $97.50, and it has another volume gap below $95.

With worries about China, Europe and the U.S. dollar all coming into play, Caterpillar could be vulnerable if the market experiences further downside. The company reports earnings on Thursday, Oct. 23.

stock charts CAT

CAT, one-year chart

Stock Charts to Watch: Rockwell Automation (ROK) and Honeywell International (HON)

Like Valero and HollyFrontier, these two stocks can be considered together due to their high historical correlation and presence within similar sectors.

Rockwell Automation (ROK) has slid below its moving averages and is approaching support at $110, while Honeywell Intermational (HON), at $93.30, is nearing support at $90. ROK is closer to its support, and therefore a potential warning signal for Honeywell. The two companies Nov. 5 and Oct. 17, respectively.

stock charts ROK

ROK, one-year chart

stock charts HON

HON, one-year chart

Other potential breakdown candidates in the industrials sector include Parker Hannifin (PH), Flowserve (FLS), and SPX Corp. (SPW).

Stock Charts to Watch: Harley-Davidson (HOG)

Harley-Davidson (HOG) is yet another stock that’s trading under its 200-day moving average and is about to violate the neckline of a head-and-shoulders pattern. Under the $60 level, the next stop for the stock is a four-year trendline that currently terminates at $57.40. HOG stock has been a multiyear winner, and its valuation isn’t commanding at 13.8 times forward earnings, but it won’t take much in the way of additional market weakness to tip it into breakdown territory. The company reports on Oct. 21.

HOG stock

HOG, two-year chart

Stock Charts to Watch: Teradata (TDC)

The data-storage firm Teradata (TDC) has a had a rough go in this bull market, falling nearly 45% in the past two years even as the broader market has gained 43%. Still, TDC stock could be in for  more downside if stocks weaken further in October. At Friday’s close of $42.25, the Teradata’s current downward trajectory puts it within range of the $40 level that has served as support on four different occasions in the past year. Teradata reports earnings on Oct. 29.

stock charts TDC

TDC, one-year chart

As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.

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