Verizon and the Blue Chips That Didn’t Bounce
With stocks soaring on the first trading day of the year, the pullbacks and sell-offs in the stocks that make up our latest report are a reminder that stocks have stories of their own. Even in a market as tightly correlated as this one, there will always be stocks pulling back to oversold lows and attracting buyers, while others climb to levels where profit-taking becomes an increasingly strong temptation.
Ahead of Wednesday’s trading, here are some of the bigger movers from among the blue chips of the S&P 100.
After rallying to their highest levels in months, shares of Colgate-Palmolive (NYSE: CL) have closed lower for three out of the past four trading days, including a pullback of more than 1% on Tuesday. The selling puts the stock in technically oversold terrritory ahead of Wednesday’s open.
Colgate-Palmolive was last trading in oversold territory in mid-December. Then, a five-day retreat led to a short-term rally in the stock that took shares higher by more than 4% in a week.
Also selling off while the vast majority of stocks were heading higher on Tuesday was Altria Group (NYSE: MO). Shares of MO broke down from a short-term trading range, falling by well over 3% on the first trading day of the year. The drop leaves MO deeply in oversold territory above the 200-day moving average, the stock’s first technically oversold finish since September.
Note also that shares of Altria Group were trading at yearly highs just a few weeks ago and much of the selling in the stock likely represents profit-taking in the wake of those highs.
An even better potential example of profit-taking at annual highs may be the pullback of just under 1% in Verizon Communications (NYSE: VZ). The stock finished at its highest levels of 2011 on the final trading day 2011, and on Tuesday traders took advantage of the cover of a big up day to lock in gains.
Significant additional selling will be needed to bring the stock into oversold territory, however. Even counting Tuesday’s correction, VZ is still up more than 12% from its last oversold finish in late November.
Both Colgate-Palmolive and Altria Group have positive edges of half a percent. The short-term edge in Verizon Communications is twice as large, and is also positive. While all three stocks have “neutral” ratings, Altria Group has a slight advantage over the others with its 7 out of 10 score.
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David Penn is Editor in Chief of TradingMarkets.com, home of PowerRatings and The Machine