The market is overbought. Market watchers disagree on just how overbought, but by any standard a pullback can’t be too far into the future. If the market has paid investors handsomely in 2013, what does that say about names that haven’t?
Some notable names are below their 50 day moving average. Does that signal a compelling value play or evidence of a broken stock?
The most notable is Apple (NASDAQ: AAPL [FREE Stock Trend Analysis]). The darling of the market is 13 percent away from its 50 DMA. Technically, the stock is broken by nearly every measure. As Dennis Gartman would say, a chart that goes from the upper left to the lower right is a really bad thing and Apple does that, complete with some painful gaps to the downside along the way.
In a recent article at The Street, Doug Kass says what consumers already know. Apple’s products blend in. They’re no longer the technological leaders they once were. Until Apple releases the next game changing iDevice, there is no real catalyst to blast through its 50 day. If there’s any good news, the stock has found a floor, at least temporarily.
Things were looking OK for Coach (NYSE: COH) until January 23. The stock was moving above and below its 50 day and although not an impressive chart, swing traders were finding plenty of opportunity as the stock moved inside its trading range.
However, on January 23, the company fell more than 16 percent on a modest earnings miss that sent the stock plunging 16 percent. Investors continue to avoid the luxury retail names.
Yum! Brands (NYSE: YUM) can’t seem to catch a break. The company that owns Taco Bell, KFC, and Pizza Hut fell below its 50 day in late November when it gapped down 10 percent. Since then, it has unsuccessfully tested both its 50 day and 200 day only to get punished even more.
On Tuesday, the company reported disappointing earnings, causing the stock to test its 52 week low. It has since bounced slightly but still 6 percent from its 50 day.
The SPDR Gold Shares (NYSE: GLD) is one of the most closely watched ETFs in the market. Although below its 50 DMA, there are some interesting technical and fundamental reasons to consider getting long. First, it’s only 0.3 percent below its 50 day but only 0.7 percent above its 200 day. A squeeze is setting up and recent chart action has shown support at the 200 day.
The ETF has seen a downtrend as of late but when the market is clearly in risk on mode, who wants a risk off ETF like GLD? An increasing amount of market watchers are calling for a pullback. If that happens, GLD will likely break through the 50 day and find further upside.
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