These 3 stocks are Dow 'dogs' to sell

Weak technicals, sentiment and fundamentals are weighing on a few components of the index.

By InvestorPlace May 21, 2014 2:05PM

Caption: The Intel logo is displayed outside of the Intel headquarters in Santa Clara, Calif
Credit: © Justin Sullivan/Getty ImagesBy Anthony Mirhaydari


Don't look now, but the Dow Jones Industrial Average ($INDU) is suffering a technical breakdown.


On Tuesday, the index crashed unceremoniously through its 50-day moving average -- a level that has held it up for two months after not one, not two, not three but four separate tests.


The bulls have their buy orders locked in at this level. Can the bears overrun them?


Yes, the Dow is rebounding some Wednesday. But given all the other evidence, including technical (weak volume and breadth), sentiment (options prices on the "fear gauge" is at the lowest level in at least eight years), and fundamentals (economic data has been weak both here at home and overseas), I think they will.


And if so, these three dogs of the Dow are headed for trouble.

Intel

Like the Dow Jones, chipmaker Intel (INTC) has fallen to rest on its 50-day moving average -- a level that it hasn't breached in a meaningful way since January's market selloff driven by fears over emerging markets.

Intel has been struggling since early April, which is when the overall semiconductor sector started to underperform the broad market to an extent not seen since the October-January period.


With the percentage price oscillator indicator about to drop into negative territory, I'm looking for a downside break of the 50-day MA with a price target on the 200-day moving average near $24 -- which would be worth a near 8 percent drop from current levels.


I recommended the May $27 INTC puts to my Edge Pro clients earlier this month, which ended with a near 30 percent gain.


Wal-Mart

After ripping higher between February and April to test its early December high, Wal-Mart (WMT) is coming under pressure after reporting weaker-than-expected earnings last week.

Earnings per share came in at $1.10 versus the $1.15 that was expected while revenue missed at $115 billion vs. $115.9 billion expected. But the kicker was a drop in U.S. same-store sales, suggesting that the consumer is under pressure.


A drop to test two-year support near $72 looks likely, which will be worth about a 5 percent decline from here.


International Business Machines

As the most heavily weighted component of the price-weighted Dow, IBM (IBM) has an outsized influence on the direction of the overall index.

After peaking in early April, IBM has been a drag, dropping more than 6% from its high after reporting weaker-than-expected first quarter revenues on a double-digit decline in its emerging markets business.


I'm looking for a drop back to support near the triple-bottom low near $170 set in October, December and February. That'll be worth an 8 percent-plus decline from here.


More from InvestorPlace

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.

18Comments
May 21, 2014 3:49PM
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I'm long all three of these stocks. 

Good dividend, good entry price, good long term prospects. I'll post back in 6 months, and we'll see who is right. 

You did accomplish one think  though; you got that silly article about smashed optimism off the top of the list.  Dow is up 150  right after you wrote it.

May 21, 2014 5:34PM
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It's bad enough that MSN allows perverts to post vulgar personal grievances , but to enable this fool to post ridiculous and absurd predictions is beyond the boundaries of stupidity. This is the same guy who predicted an "Epic" bear market 2 yrs.ago. with numerous other subsequent dire projections none of which came remotely close to fruition. .
May 21, 2014 7:42PM
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Anthony, when are going to understand that charts only tell you about the past.  They are useful only understanding relationships, not in predicting the future based on some miracle pattern you think only you have discovered.
May 24, 2014 12:21PM
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I'm in Intel at 22.50 yielding 4%. PE of 15, practically no debt, 18% profit margin on $50B in sales....think I'll hang onto it.
May 24, 2014 12:35PM
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Oh man … Anthony and his graphs again.  Doom and Gloom.  Tell ya what folks, I'll stay with IBM and Intel.   
May 24, 2014 11:15AM
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My family has held IBM since the late 1960's. Wont be selling anytime soon.
May 21, 2014 11:31PM
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I've known some dogs....arf, arf, arf.....yuk, yuk.
May 24, 2014 8:08PM
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Three of many, Wall street riding a high on lies and descent!
May 21, 2014 4:03PM
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Yup all I need is an "explanation why" the Markets are up about 1% today and not a bad ride.

Well all except the RUT2K, which is a "little disturbing."

I guess I'm good...Don't really need it...!

May 24, 2014 3:29PM
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Thanks for the sound advice MSN, I've got some money coming in soon and ill need to invest it !!!
May 21, 2014 9:13PM
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I agree. Selling ALL your stocks would be the wisest move, but then the Kool Aid addiction could cause some unwanted side effects so keep the best of your losers but don't whimper when the !#*^% hits the fan. 
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