Charts Show Something Broke Friday

 | Sep 11, 2016 | 8:00 PM EDT
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Stock quotes in this article:

amgn

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brcm

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nxpi

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bby

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ibm

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pfe

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IWM

The lyrics go like this:

Rock-a-Bye Baby

Rock-a-bye baby, in the treetop

When the wind blows, the cradle will rock

When the bough breaks, the cradle will fall

And down will come baby, cradle and all

Did the bough break on Friday? It certainly looks that way visually. Often, pictures speak louder than words. Take a quick scan around a diverse group of stocks, in terms of sector, and you'll see what I mean.

Amgen (AMGN) broke support on Friday that goes back six weeks. Even more, the stock closed under the 50-day simple moving average (SMA) while momentum and trend indicators continued their bearish declines. We know biotech have been challenged this year, so that's not a big deal. Right?

Semiconductors have been on fire, but check out Broadcom (BRCM) . You can also check out NXP Semiconductor (NXPI) , although I didn't include the chart today. BRCM has seen a pullback throughout the week, but it was possibly shaping up to be a bullish flag. Instead, the stock plunged 4.5% on the day and 7% on the week. It now sits well under the 50-day SMA.

Best Buy (BBY) saw a huge push late in August. One of the few retailers demonstrating relative strength in a bull market and superior strength in a struggling sector. While this one still sits well above the 50-day SMA, it has lost recent price support and now stares at the large gap and 6% lower without recent support. Secondary indicators have also plummeted. This is still one of the few names to look at here since it is above its 50-day SMA, but until we recapture $38, there is serious downside risk.

Folks are running into large-cap value with some yield either as IBM (IBM) also lost major support as well as its 10-day and 50-day SMAs. The Full Stochastics are still over the midline, but have crossed bearish, while longer-term indicators have moved into oversold territory.

How about Big Pharma with its yield and value? Pfizer (PFE) bulls aren't sold. A downright nasty failure on Friday as the trading channel over the last month failed. There will be lots of traders waiting to sell the $34.80 to $35.20 area should we bounce.

Clearly, a rotation into small-caps wasn't in order. The iShares Russell 2000 (IWM) relented a month's worth of gains in a single day. The MACD failed to regain its bullish stance and a bearish crossover in the Full Stochastics around the overbought area is troublesome. This one is important to watch Monday as it hovers just above the 50-day SMA.

If we extrapolate out to weekly charts against the 50-day SMA, we'd find these same names at or under their 10-week SMA, also a pivotal point for many technical traders. Without a strong bounce Monday, many names could find themselves struggling for the rest of the month. Bad things happen under the 50-day SMA. There is no need to force a long in most of those names. Look for names just above the 50 day SMA and use that level as a stop or hedging point.

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