Part 3 of the Dow review
MSFT Forecast: “..$62.14 Microsoft was one of the steadiest performers of the Dow in 2016 with price action consistently showing a higher relative strength than the S&P. Despite the steady advance all year, the SCTR still remains high at 78 and looks very strong. The PNF chart shows a long pole rising and our oscillators all show positive with no divergences. We see no reason why MSFT cannot continue to make new highs in 2017…”
Actual: MSFT finished 2017 at $85.50 a gain of 38%.
Now: MSFT looks strong by all technical measures even as it continues to accelerate away from the moving averages. There are no signs of divergence and in fact on the daily charts, a vertical advance is expected as it breaks away from an ascending triangle. Longer term, a period of consolidation, if it happens, will be the best opportunity to enter the stock. The stock targets $100.
NKE Forecast: “…$50.83 This was a stock that managed to be a loser on the year just past. In late September, it appeared that NKE was going to form a fifth wave advance but this eventually failed and the stock fell into the doldrums for the rest of the year. At the moment, the price looks in danger of dropping down to the mid to low ‘40’s as there are hints of a head and shoulders top. SCTR is very poor at 15, indicating little buying support. We expect prices to be lower in 2 to 4 months…”
Actual: NKE finished 2017 at $62.5 for a gain of 23%.
Now: NKE did not drift lower in 2017, but rather bounced around near the 200 day moving average before finally recovering late in the year. A double top breakout on the PNF charts at 61 showed positive momentum to where we are now near 66. There appears to be an enormous cup and handle pattern about to be resolved on the long side. A close above 66 creates another double top PNF buy signal. NKE should be much higher in 2018.
PFE Forecast: “…$32.48 Trading in a range all year, PFE wound up only slightly higher than where it started in January. The overall chart pattern is non-descript, the SCTR statistic is at 26 and the relative strength is below that of the S&P. Very little of interest technically here. We would just stand aside unless we saw any technical hints of a committed direction…”
Actual: PFE closed 2017 at $36 for a gain of 11%.
Now: After 2 years of uninteresting chart activity, the chart now looks quite constructive. A recent PNF buy signal at 36.5 bodes well for a continuation of the uptrend started late last year. Although the SCTR statistic has yet to reflect the new move, other trend indicators have turned positive.
PG Forecast: “…$84.08 This stock is in a similar position to PFE. Very little to point out pattern-wise, SCTR is at a low 35 and relative strength is poor vs the S&P. We would avoid this stock and expect that it will trade lower over the next 2 to 4 months…”
Actual: PG finished 2017 at $92 for a gain of just over 9%.
Now: While the trend of PG has been up, it’s been a lackluster performer compared to other Dow stocks. The 50 week moving average seems to be strong support for any price setbacks so that may be a good trading entry. A breakout on the daily doesn’t occur until over 94 and with a low SCTR rating, I’d be inclined to stand aside unless a new high is made.
TRV Forecast: “…122.42 This stock has been trading in a fairly tight up trending range for a number of years, finishing 2016 near the top of that range. SCTR line at 63 is steady if not persistent buying. PNF charts show a recent double top breakout but trading history seems to indicate that price will revert back to the 200 day moving averages around the $114 area. Overall, we expect this stock to only track the S&P…”
Actual: TRV finished 2017 at $136, a gain of just under 11%.
Now: A steady performer with a bit of volatility, TRV seems to be best bought near the weekly 50 period moving average which appears near 125 at the moment. Breakouts have been non dynamic affairs and the SCTR rating is very low. Still, TRV has been a steady stock for almost 10 years.
UTX Forecast: “…$109.62 This component moved up steadily all year to finish at the top of the range. UTX has a higher RS than the S&P and a steady SCTR number of 58. There was a recent PNF buy which would target $120 as a first target. We can see in fact that $120 is a fairly significant level of historical price resistance, so we think that the risk reward here is not compelling on the long side…”
Actual: UTX closed 2017 at $128 for a gain of 16%.
Now: UTX experienced a relatively volatile year, first rallying then selling off to find support at the 200 week moving average. The daily charts show a recent run to 135 and the candle indicates a consolidation may be taking place. The weekly and monthly charts however look very bullish. A pullback to the $127 area would provide a good long entry. The previous significant resistance at $120 is now major support.
UNH Forecast: “…$160.04 One of the strongest Dow stocks all year; it still shows a healthy accumulation reading of 72, the oscillator that we favor shows continued momentum without divergence. The only warning is that the price targets have been reached on the PNF chart. This may meant that price may come back to the moving averages shown on the chart below, but we expect UNH to continue advancing over the next 2 to 4 months…”
Actual: UNH closed 2017 at $220 for a gain of almost 38%.
Now: The stock chart still remains strong and despite a recent move to $230, the stock still looks poised for more gains in 2018.
VZ Forecast: “…$53.38 Verizon’s price movement in 2016 was quite volatile shaking out longs and shorts alike. It has a middling reading of 47 on the SCTR reading and relative strength is just slightly above the S&P. While not compelling at the moment, the longer term monthly chart shows good long term accumulation. Accordingly we would look to enter long on a setback in prices to the mid ‘40’s…”
Actual: VZ closed at $53 in 2017 for a no net gain on the year.
Now: After bouncing around sideways for over a year, VZ appears poised to make a break for new highs. The $50 area is an optimal point of entry, the chart is very bullish.
V Forecast: “…$78.02 Visa’s chart appears to be in the process of turning over to the downside. SCTR numbers are low at 39 and relative strength is below the S&P’s. Most compelling is the conspicuous divergence between price and our wave oscillator which has been declining even as prices have crept up. Accordingly, we expect prices on V to be lower in the next 2 to 4 months and would look for selling opportunities…”
Actual: V finished 2017 at $114 for a gain of 46%.
Now: The trend has been so effortlessly strong on this stock and there is little evidence of any weakening in technical indicators. Any retracement back to the 112 area where the 50 day moving averages lie would be a good entry point to ride the uptrend. We were dead wrong on this one in the 2017 forecast.
WMT Forecast: “…$69.12 Walmart has lagged the S&P in 2016 and the SCTR statistic is a poor 23. At best, WMT should be a sideways stock, but more likely will be lower in the next 2 to 4 months. We see little reason to be involved in WMT…”
Actual: WMT finished 2017 at 99 for a gain of 43%.
Now: In the age of Amazon, WMT still delivers. A recent gap up shows the ongoing strength of this issue. Any test of this gap to the mid to high $90’s would be an opportune entry. Despite the stock’s distance above the 50 and 200 day averages, there is no sign of weakness in WMT. Until some divergences appear, the default on WMT must be long. Another very wrong call on this stock in 2017. The break of 72 on the PNF chart was the signal that the trend had changed.
And with that comment, we remind ourselves that forecasts are based on what’s evident in the charts as they appear today. Circumstances change and bearish charts become bullish and vice versa. Always respect what the market is telling us. Given the unabated advance in the overall markets in the past year, we can expect numerous course adjustments.