There is a lot more red on my watch lists than what is shown in the index movements at the moment. It leads me to believe the overall indexes are being carried by a few big names. There have been a lot more names showing up on the bearish scans day by day lately, so we'll look at two showing some potential major moves lower in the short term should this little pullback in the markets develop into something more.
Teva Pharmaceuticals (TEVA) surprised me a bit when I saw the name pop up and looked at the chart. The health care sector as a whole has been very strong, but there appear to be some short-term cracks in TEVA's chart. The biggest eye-catcher here is the price action. The stock has spent two month trading in a channel. This week, price has broken below the channel and looks ready to retrace the entire move that began in March. While this isn't a huge move lower, there is little support for the stock between $59.50 and $56.50. Furthermore, any close back over $60.75 would be a yellow flag. I would actually use this as my stop rather than a break above the channel.
Even though a push back over $60.75 would not be bullish, it would be enough to make me believe the channel trading would be re-established for another few weeks. Bullish momentum is weak here, with a strong bearish trend being established based on the RSI and CCI. Given the price isn't down all that much over the past two months, I would view this as an indication the probability of a downside move here far outweighs any significant bounce.
Another name showing a similar breakdown is Union Pacific (UNP). The stock is trading under $100 after briefly testing the sub-triple digits earlier this month. Before June, you had to go back to October 2014 to find the sub-$100 levels. While there is some minor support right here, my concern is the drop today creates a breakdown from the ascending triangle formed over the past two weeks.
Rather than put in a solid reversal pattern, UNP added to its bearish trend. Both RSI and CCI gave up their bullish advances quickly, turning this picture even uglier. UNP looks headed to the $95 area minimally on a close under $99. I would keep an eye on the CCI and RSI to see if they can turn higher here, even a little, to create a bullish divergence. While both are still above previous lows, both are still heading lower, so we can't call a bullish divergence until there is a turn forming a bottom. There's a good chance these just continue lower here. (Union Pacific is part of TheStreet's Trifecta Stocks portfolio.)
Both names look like potential shorts or hedge positions against other longs at the moment. They both look unlikely to outperform the market here, and I would guess only a market bounce is going to help them avoid another 4% to 5% to the downside.