Inflation stormed the stage again this week with a pair of hotter-than-expected reports for June. The news had investors rushing the exits as odds of a 1% rate hike at the Federal Reserve’s next meeting surged past 50%. Emboldened bears have returned, and the backdrop for risk assets is as treacherous as ever. While some Dow stocks are holding firm against the onslaught, many look terrible. Today I’m featuring three dangerous Dow stocks to sell now.
They all suffer from relative weakness and boast some of the worst price charts of all the giants that call the Dow Jones Industrial Average home. The thing with underperformance is it tends to feed on itself. Would-be buyers often steer clear in favor of stronger stocks that offer cleaner trends and easier upside. After analyzing the daily and weekly time frames, these were the three worst-lookers of the bunch.
|WBA||Walgreens Boots Alliance||$37.20|
Goldman Sachs (GS)
JPMorgan Chase (NYSE:JPM) kicked off bank earnings with an underwhelming report on Thursday that had the banking giant off 5%. The negative commentary from CEO Jamie Dimon regarding the economy’s prospects didn’t help either. I think Goldman Sachs (NYSE:GS) could be next on the chopping block. Shares slipped alongside JPM stock but still have plenty of room to fall before giving back all of the post-pandemic gains.
The leading investment bank is scheduled to report earnings on Monday morning, but given the issues weighing on asset values, it’s unlikely GS will fare any better than its predecessor. Recessions aren’t known for their kindness to banks.
On the price front, GS is in a consistent daily downtrend below all moving averages. The weekly 200-day moving average beckons as the next stop at $265.
I can think of three reasons to abandon Caterpillar (NYSE:CAT). First, it’s one of the messiest movers in the Dow. The price chart is riddled with gaps and sharp moves in both directions, giving little edge to traders. Second, it’s suffered alongside the recent fallout in basic materials and commodities. Just over one month ago, it was nearing its 52-week high. Now, after falling virtually every day since, prices have cracked significant support, completed a topping pattern and notched a 52-week low. The turnaround has left heaps of resistance overhead to thwart future recovery attempts.
Third, the sudden shift away from commodities has taken and will continue to take a toll on cyclical stocks like Cat and Deere (NYSE:DE). Recessions are their kryptonite. While prices are extremely oversold in the short run, and a bounce could be in store, I suggest selling in the strength and revisiting CAT later when things have improved.
Walgreens Boots Alliance (WBA)
Today’s final contender for dangerous Dow stocks to sell is Walgreens Boots Alliance (NASDAQ:WBA). Most large-cap stocks were flourishing before this year’s reversal of fortune. Walgreens wasn’t one of them. Over the past seven years, the wellness store has suffered in good times and bad. Shares peaked in 2015 at $97.30 and have since crumbled by 62%.
This year’s descent gives little hope for an end to the spiral. Distribution days litter the chart, and prices were torched following last month’s earnings announcement. WBA failed to rebound alongside the rest of the market recently and fell to a 52-week low on Thursday amid increasing volume.
Look for prices to fall to the 2020 lows near $33.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.