How To Trade 5 Key Dow Components With Negative Weekly Charts

Disclosure: I hold no positions in American Express, DuPont, Nike, Travelers or United Technologies.

It’s been a while since the Dow Jones Industrial Average set its all-time intraday high of 18,668.44 on Aug. 15. Investors beware, last week this key average closed with a negative weekly chart, defined as followed.

The Dow closed Friday at 18,261.45, below its five-week modified moving average of 18.277.96 with its 12x3x3 weekly slow stochastic reading falling to 75.25, and is now below the overbought threshold of 80.00. This shifts the weekly chart to negative!

Approximately half of the Dow component stocks have negative weekly charts, including the five profiled today as shown in this scorecard.

Looking at the daily chart for the Dow, this benchmark has been below its 50-day simple moving average since Sept. 9. On this date the Dow gapped below its 50-day SMA, then at 18,413.68. The low of 18,446.69 on Sept. 8 created a price gap between that low and the high of 18,404.17 on Sept. 9.

Here’s the year-to-date daily chart for the Dow.

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Note that the Dow has been above what market technicians call a “golden cross” since April 19 when the 50-day simple moving average (in blue) crossed above its 200-day simple moving average (in green). This bullish signal indicates that higher prices lie ahead and that weakness to the 200-day SMA is a buying opportunity as it was on June 27 when the average was 17,239.46.

The Sept. 8 to Sept. 9 price gap is a warning that the bullish patterns may be changing. Note that last week’s high of 18,449.88 on Sept. 22 was a failed test of the 50-day simple moving average, now at 18,430.20. This high also filled the gap to the Sept. 8 low and gains could not be sustained on Friday.

Here are the weekly charts and how to trade five of the stocks with negative weekly charts.

American Express (AXP) closed at $63.85 on Friday, down 8.2% year-to-date and in bear market territory 33.7% below its all-time intraday high of $96.24 set on July 1, 2014. The stock is also in bull market territory, 27% above its Feb. 11 low of $50.27.

American Express' weekly chart is negative with the stock below its five-week modified moving average of $64.36. The stock has been below its 200-week simple moving average since the week of Nov. 13, 2015, with this average now of $76.14. The stock has a 12x3x3 weekly slow stochastic reading of 78.71, down from 81.79 on Sept. 16, falling below the overbought threshold of 80.00.

Investors looking to buy American Express should consider buying weakness to $54.46 and $52.47, which are key levels on technical charts until the end of September. Investors looking to reduce holdings should consider selling strength to $65.65, which is a key level on technical charts until the end of 2016.

DuPont (DD) closed at $66.77 on Friday, up just 0.3% year-to-date and in correction territory, 12.8% below its all-time intraday high of $76.61 set on March 13, 2015. The stock is also in bull market territory, 31.7% above its Jan. 29 low of $50.71.

DuPont's weekly chart is negative with the stock below its five-week modified moving average of $68.00. The stock is above its 200-week simple moving average of $60.42, last crossed during the week of Feb. 12. The stock has a 12x3x3 weekly slow stochastic reading of 75.68, down from 81.61 on Sept. 16, falling below the overbought threshold of 80.00.

Investors looking to buy DuPont should consider buying weakness to $59.18, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $72.78, which is also a key level on technical charts until the end of 2016.

Nike (NKE) closed at $55.15 on Friday, down 11.8% year-to-date and in correction territory, 19.1% below its all-time intraday high of $68.19 set on Dec. 23, 2015. The stock is also 7.1% above its June 27 low of $51.47.

Nike's weekly chart is negative, with the stock below its five-week modified moving average of $56.29. The stock is well above its 200-week simple moving average of $45.21. The stock has a 12x3x3 weekly slow stochastic reading of 54.78, down from 65.55.

Investors looking to buy Nike should consider buying weakness to $53.48, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $69.33, which is also a key level on technical charts until the end of 2016.

Travelers (TRV) closed at $115.31 on Friday, up 2.2% year-to-date and is just 3.4% below its all-time intraday high of $119.32 set on Sept. 2, 2016. The stock is 13.9% above its Jan. 21 low of $101.23.

Travelers' weekly chart is negative, with the stock below its five-week modified moving average of 116.15. The stock is well above its 200-week simple moving average of $97.06. The stock has a 12x3x3 weekly slow stochastic reading of 66.14 down from 76.42 on Sept. 16.

Investors looking to buy Travelers should consider buying weakness to $102.62, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $121.88, which is a key level on technical charts until the end of September.

United Technologies (UTX) closed at $102.56 on Friday, up 6.8% year-to-date and in correction territory, 17.6% below its all-time intraday high of $124.45 set on Feb. 20, 2015. The stock is also in bull market territory 23% above its Jan. 20 low of $83.39.

UTX's weekly chart is negative with the stock below its five-week modified moving average of $104.21 and below its 200-week simple moving average of $104.31. The stock has a 12x3x3 weekly slow stochastic reading of 57.74 down from 69.88 on Sept. 16.

Investors looking to buy United Technologies should consider buying weakness to $96.30, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should consider selling strength to $105.98, which is also a key level on technical charts until the end of 2016.

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