Stocks are slumping on Wednesday as the European Central Bank reportedly wants to stay in “wait and see mode” on stimulus — removing the near-term risk of fresh easing measures. For a market addicted to the monetary morphine, this is bad news.
Also weighing was a weak ADP employment report here at home.
As a result, the Dow Jones Industrial Average is falling to test support from the late March/early April lows. A violation of this level would likely result in a test of the 200-day moving average near 17,000.
In anticipation of this, keep an eye on these seven blue-chip stocks for possible put option/short side plays.
Blue-Chip Stocks at Risk: Caterpillar Inc. (CAT)
Caterpillar (CAT) shares have dropped to test their 50-day moving average for the first time since late February.
Shares haven’t gone anywhere since 2010, as global growth concerns — especially out of China — weighed on sentiment. More recently, a slowdown in mining and energy sector activity has hit Caterpillar stock. While CAT saw a nice lift off of the January low — a retest of support around $60 last tested in 2011 — that is now being sold.
The company will next report results on July 26 before the bell. Analysts are looking for earnings of 98 cents per share on revenues of $10.1 billion.
Edge Pro subscribers are holding a position in the May $74 CAT puts.
Blue-Chip Stocks at Risk: General Electric Company (GE)
General Electric (GE) shares are falling out of a three-month consolidation range in the first violation of its 50-day moving average since January.
Analysts at RBC Capital Markets recently noted that the company is still a transformation story and earnings power won’t ramp fully until we near 2018.
The company will next report results on July 22 before the bell. Analysts are looking for earnings of 44 cents per share on revenues of $30.9 billion.
Blue-Chip Stocks at Risk: Yahoo! Inc. (YHOO)
Yahoo (YHOO) shares are backing away from highs near $38 after issuing disappointing forward guidance as its operational turnaround stalls.
The focus is increasingly on strategic options for the fallen internet giant, which is a nice way to say CEO Marissa Mayer is trying to find a buyer. Q1 revenues dropped 17.6% from last year to $859 billion.
Saleable assets include a $23 billion stake in Alibaba Group Holding Ltd (BABA), a $9 billion stake in Yahoo Japan and its core business worth about $5 billion (which is worth less than the $7 billion in cash and cash-like assets on hand).
Watch for a break below the 50-day moving average as investors lose patience, setting up a test of support near $28.
Blue-Chip Stocks at Risk: Oracle Corporation (ORCL)
Oracle (ORCL) shares have lost their 50-day moving average for the first time since December after forming a double-top resistance pattern near $41.50.
This could be the start of a slide down the right shoulder of an epic, three-year-long head-and-shoulders reversal pattern that started in 2014.
The 200-week moving average near $36.50 is the near-term target — a level that the stock has frequently bounced off of since the dot-com low in 2002.
Blue-Chip Stocks at Risk: Tesla Motors Inc (TSLA)
With the ultra-hyped Model 3 unveiling behind us, Tesla (TSLA) shares have dropped below their 50-day and 200-day moving averages for the first time since January, as old concerns about the company’s ability to execute on production return.
There is also some nervousness ahead of the company’s Q1 earnings release after the close on Wednesday, after Tesla pre-announced weak Model X deliveries on supply chain issues.
Also weighing on shares were reports that two VPs of manufacturing are leaving the company. Short interest remains high, as 22% of float.
Blue-Chip Stocks at Risk: Intel Corporation (INTC)
Shares of chipmaker Intel (INTC) have dropped below their 50-day and 200-day moving averages for the first time since January, as the recent announcement of 11,000 job cuts hasn’t restored investor confidence amid ongoing declines in its core PC processor business despite efforts to move into the cloud and Internet of Things businesses.
A break of long-term support at its 200-week moving average near $26.50 would end a three-year consolidation pattern going back to 2014.
Edge Pro subscribers are enjoying a 170% gain in their May $31 INTC puts recommended on April 27.
Blue-Chip Stocks at Risk: Boeing Co (BA)
Boeing (BA) shares have been turned away from their 200-day moving average after two breakout attempts in March and again in late April. The result is what looks like a continuation of a downtrend that started in December.
Airline stocks have been under pressure lately on overcapacity concerns, possible leading to sympathy selling in BA as investors realize new order growth is likely to slow.
The company will next report results on July 27 before the bell. Analysts are looking for earnings of $2.14 per share on revenues of $23.2 billion. Edge Pro subscribers have started a position in the BA May $130 puts.