Despite the market's gains today, a few select stocks are inching dangerously close to the edge of a cliff
(if they haven't fallen off it already). Those stocks are Abercrombie & Fitch Co. (ANF), Novavax, Inc. (NVAX), Agilent Technologies Inc. (A), Beazer Homes USA Inc. (BZH), and Newell Rubbermaid Inc. (NWL). Here's a closer look at the troubling trends for each one.
It looks like the market finally recognized the fact that
Abercrombie & Fitch Co. (
ANF) shares were trading at 58 times earnings, though it took some obvious success from the low-priced retailers -
and some disappointing results from the 'fashion' realm of the retail world - to drive the point home for ANF fans.
Even so, the bears may not want to dig in too deep here. Abercrombie & Fitch may have kept plowing into ridiculous-valuation-ville had it not been for a key resistance line being intercepted. In that same vein, we don't expect ANF to fall any further than a parallel support line, currently at $25.80. That's not a bad swing trade though.
We know we're going to incite a lot of hate mail by picking on
Novavax, Inc. (
NVAX)... one of the market's newly-loved swine flu plays. But as we said when the H1N1 hysteria started,
there's more hype than fiscal opportunity here (even though there
is a fiscal opportunity). That included Novavax.
The reason NVAX has made our breakdown list is a legitimate one though - Tuesday's bar was a classic blowoff top and reversal pattern. We saw the stock gap up at the open (
following a multi-week rally, mind you), and then spend the rest of the day sliding lower.... on high volume. Since then, Novavax shares haven't been able to pick themselves up off the mat.
So what? If the interpretation of Tuesday's bar -
an island reversal - is correct, then that was the point where the market turned into net profit-takers rather than net buyers. The more it falls, the more intense the selling pressure could get for NVAX.
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In the interest of full disclosure, we actually
recommended buying Agilent Technologies Inc. (
A) in mid-January. We still own it though, and would like nothing better than to see A continue rallying to add on to our 31% gain. We have to call them like we see them though, and the Agilent chart is worrisome.
The tumble over the last two days isn't a major concern, since we've seen Agilent survive that kind of action before. The worry is that the tumble has come after A shares clearly slowed down to a crawl over the prior month.
It looks like the $25 level is holding up as support for now, but if Agilent cracks that line, not only could the stock present a big downside/bearish opportunity, but we may even go ahead and take profits on (by exiting) our official A trade.
We almost issued a breakdown alert for
Beazer Homes USA Inc. (
BZH), but
chose Pulte Homes instead, not wanting to double-team the homebuilders group
too much in one shot. As we said of Agilent though, we call them like we see them; if one of these stocks is falling, then odds are that most of them are falling.
In any case, Beazer Homes shares have given us the most basic of bearish warning... a bearish MACD cross-under. The fact that the cross occurred after an excessive runup over the prior six weeks (into an overbought condition) just makes the MACD signal a little more meaningful.
And finally,
Newell Rubbermaid Inc. (
NWL) is feeling the effects of a little too much rally with out the results to back it up. The company's a net loser for the last twelve months, and the forward-looking P/E of 9.5 seems a little hard to believe.
The biggest burden of all for Newell Rubbermaid shares, however, may not be the fact that they're overbought. No, the market is eying that $3 billion in debt the company's got on the books, and is wondering when or how that's going to be a drag on NWL... a stock with a $3.7 billion market cap.
The right way to trade Newell Rubbermaid is to wait for support at $13.18 to crack. When/if it does, NWL could make its way back to support at $10 in a hurry.
If you'd like to know when or if we issue trading alerts specifically for BZH, A, NVAX, ANF, and NWL, then be sure to subscribe to our free e-newsletter. It's delivered two to three times per week.
