We continue with our Dow recap.
XOM Forecast: “…$90.26 When viewed in the context of a longer term monthly chart, XOM is dead neutral essentially trading in a broad range for years. The SCTR reading is 43 which is just middling but XOM does perform a bit better than the S&P benchmark. There is a breakout point at $94 on the PNF charts and since price is above the moving averages, we’ll lean somewhat favorably towards it. Despite this, I don’t expect that a big move on XOM is imminent…”
Actual: XOM closed at $84 at year’s end for a return of minus 6%.
Now: It was a rough year for XOM but the fortunes look about to change. As we saw with CVX, the fortunes of oil and oil related companies are on the upswing. Despite its recent surge, I still expect the oil sector to be strong this year and expect that XOM will outperform the Dow Index. A move to $100 is targeted.
GE Forecast: “…$31.6 Essentially a sideways mover for most of last year. Its SCTR number of 47 underscores the vanilla trend of the stock. The long term up channel is still in play and so far, it looks to be a market performer only. Historically, breakouts to new highs are met with very little follow through, so I have no inclinations towards this stock for now…”
Actual: The stock closed at $17.5 for a loss of 45%
Now: Clearly the dog of the Dow, once its most iconic company, but when it announced an iffy forecast and cut its longstanding dividend, holders did a hard exit. There are signs of climatic sell volume and the stock looks washed out. Still, nothing has changed to alter the newly bearish outlook and accordingly, GE will underperform this year as well. We will look for signs of renewed accumulation, but at the moment, we would avoid GE
GS Forecast: “…$239.45 One of the stellar performers in the last quarter of 2016, the price approaches the all time high in the $250 area set in 2007. The price action has been vertical and consequently, moving averages lie far below current activity. It looks to be in a “3 wave” of some kind and difficult to chase on the long side. We expect a consolidation or retracement of recent activity into a “4 wave” of some kind. The SCTR has one of the highest readings among all Dow stocks at 98, indicating steady support even at these prices. There is no acceptable risk/reward entry point for now so we will wait for an opportunity…”
Actual: GS closed 2017 at $255 for a gain of just over 6%.
Now: GS actually followed our roadmap and more or less consolidated in 2017. We expected some kind of wave 4 adjustment but now the chart looks quite constructive as it appears we are breaking out into a 5th wave. $300 is the year target.
HD Forecast: “… $134.08 Home Depot is trading in a broad sideways channel since rallying from $18 to $140 in 7 years. In 2016, the price only kept track with the S&P index and the present reading of 51 on the SCTR doesn’t show that buyers are super eager to be long the stock. Accordingly, we’d be inclined to look for a long entry near the bottom of its range in the $118 area than chase it on a breakout above $139. We note that $138 is also a double top buy on the PNF chart as well…”
Actual: HD closed at $189 for 2017 for a gain of 41%
Now: There was no dip to buy at $118 and instead the buy was triggered above the $139 area. The stock has been on a tear and still looks strong. The strengthening economy bodes well for stocks in this space. As with other stellar Dow stocks though, the price is well above the moving averages and we can find no entry with good risk reward at these price levels.
IBM Forecast: “…$165.99 This Dow component has been on a grind up from the lows made earlier last year in the $120 area and which was the subject of our bottom pick. The pattern still looks favorable here but the SCTR has yet to hint at any prolonged accumulation. We can see the supply that should cap the price move at the $175 area. We’d be inclined to look at the lower end of the trading range at the $146 area to initiate new longs…”
Actual: IBM closed the year at $153 for a loss of just over 8%
Now: There’s a possibility that IBM has undergone a multi year consolidation and is tracing out a pattern of building momentum. The longer term charts show that since the breakout above $100 in 2011, the recent few years’ action has successfully completed a test of that breakout. We think that the recent highs in the mid 170’s will be tested and that it will be pierced. We expect IBM to make new all time highs this year as the longer term charts look very constructive.
INTC Forecast: “…$36.27 Intel was a steady if unspectacular performer last year and a look at the weekly chart only tells of a steady slight uptrend. A 63 reading on the SCTR is middling and it has only been a market tracker. The stock is above its moving averages and a move above $38 creates a double top buy signal on the PNF. We’d be inclined to be long here with a stop down at the December lows of $33…”
Actual: Intel closed 2017 at $46 for a gain of 28%.
Now: Intel is in the midst of resolving a large flag on the monthly charts which if realized will target $55 on the long term charts. Recent news about the performance of their chips has set the stock back into a consolidation, but i fully expect price will resolve on the upside.
JNJ Forecast: “…$115.21 This chart looks to be very dynamic very soon, heading into a sharp wave “5” flag type move to the upside. This pattern is also evident on the PNF charts as well. A hammer candle last month is another hint of bottom made on the last downswing. The SCTR of 33 however gives off no such optimism. We will watch for confirmation by this tool if prices begin moving to take out the recent highs at above the $118 area with high accompanying volume. We expect new highs to be made…”
Actual: JNJ closed at just below $140 for a gain of 22%.
Now: JNJ’s chart is coiling and we expect another big leg up in 2017. $170 is our preliminary target area. All trend statistics look good with the only laggard being the sticky SCTR rating.
JPM Forecast: “…$86.29 JPM is in a strong wave “3” up channel which have taken prices well beyond our moving averages. SCTR reads at 95 indicating continued support even as prices rise. Indeed if we consult a monthly chart, we can observe that it is only now breaking away up from a long base. Unfortunately there is no logical entry point after such a move. Thought it looks powerful, we will not be looking to enter a trade…”
Actual: JPM closed at $106 for 2017, showing a gain of 23%.
Now: We could not find a good risk/reward entry at the outset of 2017, and that is still somewhat the case now. Price action looks very strong and should prices move towards the 20 day moving average near $103 on a correction, we would use that as a long opportunity assuming that markets overall continue trending.
MCD Forecast: “…$121.72 MCD has been one of the steadiest performers in the Dow for the past 10 years. Last year however was a range-bound one with little net progress from January. It appears that this sideways phase will soon turn into the next up-leg. Our oscillators show no divergence and the wave pattern looks ready to resume on the upside. We’ve yet to see the SCTR uptick but expect that it will once price begins to move. A move below 109 will serve to protract the correction, but we expect that MCD will make new highs…”
Actual: MCD closed 2017 at $172 for a gain of 41%.
Now: MCD continues to ratchet up with very little volatility, the best of all worlds. While the trend looks intact, there are some hints of divergence in the RSI and SCTR statistic. Nevertheless, if the price stalls, it should only be a consolidation. We see nothing that indicates long term weakness.
MRK Forecast: “…$58.87 Pharmaceuticals have moved fitfully in 2016, but MRK has been relatively stable netting a neutral return for the year. There was a false breakout in mid-November that was not supported by our oscillators. SCTR is low-ish at 32. The stock has a negative relative strength to the S&P and a PNF buy doesn’t happen until $65. Unless any of these events happen, we’d stand aside…”
Actual: Merck closed the year at $56 for a loss of 5%.
Now: Oddly, we are quite optimistic on certain pharmacy and bio tech stocks this year. Merck is not one of them. Charts show significant price resistance at $60 and i don’t expect that to be broached. Unless that happens, we would avoid MRK.
Continued in Part 3