The Dow Jones Industrial Average Index is up by a little more than 12% year to date and still very close to the all-time highs set back on April 11th at 14’887.50. As such, I thought it’s time to scan the index for components that are sitting on thin support, which if broken could lead to a quick slide lower. To broaden out the selection somewhat more, I decided to also focus on three different industries.
First up, Hewlett Packard (HPQ) – member of the technology sector.
After a vicious decline off its April 2010 highs, the stock finally found a bouncable bottom in November 2012, from where it proceeded to rally 110% in 4.5 months, topping out on April 1st 2013. The recent slide off the highs brought the stock below its November 2012 up-trend as well as its 50 day simple moving average. Additionally, over the past ten trading sessions the stock also developed a so called bear-flag pattern, which as the name suggests, usually resolves to the downside. A break below $19.50 could get the stock moving toward its 200 day simple moving average around $17.30
Next up, representing the consumer non-cyclical space is Proctor & Gamble (PG). Since the stock’s post earnings drop on April 24th, it managed to consolidate right above the key diagonal support line near $76.30. The consolidation form here too is taking the shape of a bear flag formation. In short, should the stock drop below the diagonal support line, and thus also out of the bear flag formation, the stock will likely accelerate to the downside.
Last but not least, here’s a look at pharmaceutical giant Pfizer Inc. (PFE). The stock’s November 2012 up-trend remains intact, reinforced by its 50 day simple moving average. The stock’s steep angle of decline off its April highs increases the odds that the stock eventually slices through this layer of support (around $28.80 – $28.90) If it does, downside acceleration should increase and the stock could fall at least 5% before next support.