Not every bearish setup comes from a stock doing poorly. For instance, Stanley Black & Decker (SWK) is up almost 11% on the year. But the action from late last week is troublesome. Even though I'm focused a bit more on the longer-term view, taking a glance at the daily chart lays a foundation for a larger thesis.
The concern with the daily chart is this change in trend and momentum. The price action from Thursday should have already grabbed your attention. A big push higher, over $110, which would have triggered a breakout from a trading channel IF it held. It didn't. Making it worse is the fact the stock faded from a breakout to a breakdown. This will have many traders doubting any push back above $108, assuming we can get through the $108 resistance again. SWK now has additional resistance at $106.
Even though this is a daily chart, I'm using longer-term setting on both the Relative Strength Index (RSI) and the MACD. RSI is struggling under 50, which is bearish for price and MACD has been bearish for the last month while price consolidated in the channel. I do view this as a bearish divergence. The shorter-term Slow Stochastics cannot find its way above 50 and now is also in danger of a bearish crossover. I expect support at $102 to be tested with a short-term new trading range to develop between $102 and $106 before SWK finally breaks and hits $98.
The $104 support level becomes a greater focus on the weekly chart. So far, the stock is still hanging in there for the bulls. But a breakdown on the daily chart is very likely to force the hand of the longer-term holders who keep an eye on the technical setup. The $104 level is a convergence of support. A short-term trading channel support level meets with a rising wedge support line. A break of both, again, brings the $98 target into play. Last week's candle is bearish. Note the large wick above the closing price. The push from the bulls simply ran out of a steam. A lot of steam. The positives are momentum and trend are still bullish, but now threatened. Slow Stochastics remains overbought, but has experienced a bearish crossover while above 80. This isn't the end of the world and not a major concern as long as both lines remains over 80. Should be see them both go under 80, then I would anticipate a rather large move to the downside.
The RSI here, measured on a shorter term than the Stochastics, is already demonstrating a decent drop but still holding over 50. Should SWK drop much more next week, this indicator will threaten 50. Bulls do not want to see a weekly drop under 50 here either.
Overall, this isn't the worst chart in the world, but when names showing strength previously start to falter and throw up multiple flags, traders need to be very particular with their stock selection.