U.S. equities are under heavy pressure on Thursday in the wake of disappointment trade data out of China overnight.
As a result, the Dow Jones Industrial Average tested below the 18,000 level — falling to a range not seen since July — as it breaks down and out of a two-month “pennant” formation and ends a four-month consolidation range to the downside.
The response was to a 10% drop in Chinese exports in dollar terms, the largest decline in seven months. That revitalizes fear over the litany of problems facing China: A massive bad debt problem, currency weakness, capital outflows and a tendency for interbank lending rates to spike in situations like this.
As noted by Deutsche Bank analysts, “while the trade data has a tendency to be quite volatile, the data will pose downside risks to the Q3 GDP print next week and will also likely put the focus back on the currency.”
While stocks are clawing back some of their early morning losses here in afternoon trading, the technical damage has been done and the outlook could hardly be weaker: Breadth continues to narrow and the Dow is falling further away from a declining 50-day moving average.
As a result, keep an eye on these five blue-chip stocks for possible breakdowns.
Blue-Chip Stocks: American Express (AXP)
American Express Company (NYSE:AXP) shares are falling further away from their 200-day moving average and are now down about 10% from their summertime highs.
A test of the June low near $57 now looks likely as the company continues to struggle with the loss of its exclusive deal with Costco Wholesale Corporation (NASDAQ:COST). The announcement of a new buyback program and a higher dividend in September didn’t generate any excitement.
The company will next report results on Oct. 19 after the bell. Analysts are looking for earnings of 95 cents per share on revenue of $7.71 billion.
Blue-Chip Stocks: Home Depot (HD)
Home Depot Inc (NYSE:HD) shares have declined to test critical support near $125 that bolstered the share price in June and again in September. Shares are down some 10% from their summertime high on lingering fears surrounding the confidence of the U.S. consumer and the strength of the housing market.
While last quarter’s results set another record, tougher year-over-year comparisons going forward and valuation concerns have investors nervous.
The company will next report results on Nov. 15 before the bell. Analysts are looking for earnings of $1.58 per share on revenues of $23.08 billion.
Blue-Chip Stocks: Ford (F)
Ford Motor Company (NYSE:F) shares have broken down out of a five-month support range near $12 to test levels not seen since February. The technical picture is terrible, with shares now trading below declining 50-day and 200-day moving averages with the 50-day below the 200-day.
Auto sales, which have been a bright spot for the U.S. economy in recent years, seems to be hitting a speed bump as credit quality declines and demand cools: Ford’s sales dropped 7.7% from last year in September.
The company will next report results on Oct. 27 before the bell. Analysts are looking for earnings of 21 cents per share on revenues of $33.44 billion.
Blue-Chip Stocks: Disney (DIS)
Walt Disney Co (NYSE:DIS), which was for years a momentum sweetheart on Wall Street that seemingly could do no wrong as it gobbled up the biggest movie and entertainment franchises in the business, has been slammed lower since May in a 15% decline on worries about the health and profitability of its cable television business.
Competitive pressures are intensifying from over-the-top providers like Netflix. And many young consumers aren’t interested in paying for big, expensive cable TV bundles. For now, the company simply doesn’t have an answer to the problem.
The company will next report results on Nov. 10 after the bell. Analysts are looking for earnings of $1.17 per share on revenues of $13.66 billion.
Blue-Chip Stocks: General Electric (GE)
General Electric Company (NYSE:GE) shares have been stair stepping down since peaking in July, breaking down out of a tight consolidation range in early September and again in early October. That’s been a loss of about 10% that now threatens to return shares to levels last seen in February.
There is no specific negative catalyst weighing on the stock, just general unease about the health of the global economy.
The Oct $29.50 GE puts recommended to Edge Pro subscribers are up more than 72% since recommended last week. The company will next report results on Oct. 21 before the bell. Analysts are looking for earnings of 31 cents per share on revenues of $29.81 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
