Back on June 9 we highlighted 15 stocks that I considered vulnerable because they were over-owned and extended on the upside. I reviewed these 15 stocks this morning and culled out the five companies with charts and indicators that now suggest they are the weakest and might be ones you want to check on first if they are in your portfolio.
Symantec Corp. (SYMC) doubled from its early 2016 nadir (see the third chart below). Prices reached $33 in May and corrected down to the rising 200-day moving average line. SYMC rallied this month, but unlike many other Nasdaq names did not make a new 52-week high.
In this chart showing the relative performance of SYMC to the Nasdaq we can see that Nasdaq moved to new highs in July but Symantec did not. A weakening relative strength picture is one sign that some technical analysts look for when they believe a stock is weakening.
In this daily bar chart of SYMC, above, we can see how prices tested and rebounded off the rising 200-day moving average line. Most of the time a successful test of the long-term 200-day line is a great buying opportunity. Joe Granville wrote about that technique in the 1960s. Volume is heavier in May and June as prices declined, but after the successful test of the 200-day the volume is lighter -- strange.
A relatively low-risk buying opportunity should see more traders and investors acting on it, right? Now look at the slope of the 50-day moving average line -- still negative. The On-Balance-Volume (OBV) has not broken above its June peak, telling us that buyers are not foreshadowing new price highs. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line in bullish territory, but the two averages have begun to narrow.
In this weekly bar chart of SYMC, above, we can see that prices tested the rising 40-week moving average line at the end of June/beginning of July. Volume has declined the past three months and the weekly OBV line has not made a new high the past four months. There is a large bearish divergence over the past 12 months as prices made higher highs but momentum made equal highs.
In this Point and Figure chart of SYMC, above, we can see that prices have overshot a $24.70 price target. A decline to $27.95 will be bearish and a rally to $33.15 is needed for a fresh upside breakout.
Bottom line: It looks like SYMC is making a lopsided double-top pattern with a lower second peak. The initial downside price target from this pattern measures to the $23 area. I have no idea what the fundamental story is on SYMC, but I would want to review my portfolio if I owned shares.