All around the world, equities have been hit pretty hard in the last week — and large caps have been no exception.
Even big, stable blue chips — many of which also sport hefty dividends, which should provide further support — haven’t been able to hold up well. You can thank the slow, upward creep of Treasury yields over the past few months for that.
In this environment, the Profit Scanner powered by Recognia has identified four large caps that are giving off bearish signals.
What this means for you depends on your own situation. For some, this might simply be the right time to sell out and collect profits on these widely held blue chips. For others, these bearish signals could be used to establish short positions or bearish options trades.
In no particular order …
Blue Chips in Trouble: Wyndham Worldwide (WYN)
Click to Enlarge Wyndham Worldwide (WYN) — the hotel company that owns such familiar U.S. brands as Ramada, Howard Johnson and Days Inn — had several bullish signals on July 2. But a lot has happened between now and then … and on July 7, the Profit Scanner identified a hanging man pattern on WYN’s chart.
As the ominous name suggests, the hanging man is a bearish signal, and occurs at the top of a recent uptrend. It consists of a long lower shadow with a small real body at the top of the range — which suggests the stock has become susceptible to selling pressure and is due to reverse lower.
This particular pattern took five days to create, making this a short-term bearish signal for Wyndham stock. However, there were a couple of longer-term bearish signals in June, too, when WYN moved below its 200-day and 50-week moving averages … so investors might want to consider switching to a bearish stance.
Blue Chips in Trouble: Blackstone (BX)
Click to Enlarge Blackstone (BX) also gave off a fairly significant bearish signal recently; in this case, it was a head-and-shoulders top. The stock is currently hovering around $39, and the Profit Scanner is looking for a further drop to the $36-$36.80 level in the intermediate term.
The head-and-shoulders top is one of the most popular chart patterns, as it’s considered to be one of the most reliable. It’s also fairly easy to spot, taking the form of three rallies, the highest of which is in the middle (the “head”) flanked by two lower highs (the “shoulders”). Volume tends to be high during the first two rallies, then tapers off through the right shoulder, and spikes again as the stock price breaks the lower “neckline.” The implication here is that the stock has finished a distribution period during a major uptrend, and is now embarking on a new downtrend.
For opportunistic traders seeking downside profits, Blackstone has a fairly robust option chain … and with several other bearish signals coming into play in June and this month, buy-and-hold investors may want to stay away until the dust settles.
Blue Chips in Trouble: Owens Corning (OC)
Click to Enlarge Owens Corning (OC) is having a pretty rough go of it as well. Shares of the building supplies manufacturer are down more than 3.5% in the last week, and on Tuesday, the Profit Scanner found two bearish signals on OC’s chart, one of which was a top triangle pattern.
This pattern consists of two converging trendlines drawn around the stock’s lower highs and higher lows. Before the triangle can reach its apex, the stock reverses lower, suggesting that the stock has broken down after a consolidation period.
Based on the top triangle pattern, the Profit Scanner is looking for a further decline of anywhere from 18%-22% in the intermediate term.
Owens Corning’s other bearish signal came from the MACD. This technical indicator basically tells us when a stock price is gaining (or, in this case, losing) strength, and is calculated by taking the difference between a shorter-term and longer-term moving average. When the MACD crosses below its own moving average, that’s a signal that the stock is facing short-term downside.
Blue Chips in Trouble: HollyFrontier (HFC)
Click to Enlarge Last but not least is HollyFrontier (HFC), a refining company that produces lubricants and asphalt in addition to gasoline and diesel fuel. Like Wyndham Worldwide, HollyFrontier completed a hanging man pattern on Tuesday, which implies that the stock has made a top and is looking to trend lower from here.
The hanging man doesn’t carry a particular price target … but given that HollyFrontier just suffered some insider selling and a downgrade from Zacks, bearish traders should consider hopping aboard and riding the stock lower.
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.
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