When Leaders Lose Support

Certain leaders in certain sectors tell us whether a market is healthy in the short term. For instance, among the semiconductors, we look to Intel (INTC - commentary - Cramer's Take), Broadcom (BRCM - commentary - Cramer's Take) or maybe even Texas Instruments (TXN - commentary - Cramer's Take).

For brokers or financials, we go to Goldman Sachs (GS - commentary - Cramer's Take) or Bear Stearns (BSC - commentary - Cramer's Take). When we think of an important sector like the transports, we think first of the giants like FedEx (FDX - commentary - Cramer's Take). When we think of tech, we think of the leader of leaders: Apple (AAPL - commentary - Cramer's Take).

On Wednesday and Thursday in the Columnist Conversation, I posted about the erosion of Apple as it failed on its 60-minute chart to take back its lost 50-day exponential moving average. It fell hard when it backtested this level.

On Thursday, the stock started to lose a far more important 50-day exponential moving average: the one on its daily chart at $84.12. This 50-day EMA was cleared to the upside in July, and Apple never looked back as it climbed higher and higher. But Thursday's action is very important, as it marks a total change of character. It is extremely unusual for a stock of this magnitude to not fight at its 50-day EMA.

Normally, after five months, this test would be a huge buying opportunity, but that's not the case. The fact that the bulls didn't support it is very odd. This too is a change of character.

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The behavior of FedEx is almost the same, except that it's dealing with its 200-day EMA. It has already lost its 50-day EMA, which is even more bearish than Apple's situation. However, make no mistake, both are considered near-term bearish.

A week ago, FedEx lost its 50-day EMA at $113.85, but at least it put up a fight. It's almost unheard of for a stock of FedEx's stature not to get a huge lift upward off its 200-day EMA, especially after recently losing its 50-day. It's some strange, unusual action.

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As you can see from the charts, FedEx and Apple are getting oversold, so a bounce could occur at any time. However, stocks can remain oversold for long periods of time when important breaks of support occur. Notice also the high volume on recent selling, which isn't something you should ignore.

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At the time of publication, Steiman had no positions in any of the stocks mentioned in this column, although positions may change at any time.

Jack Steiman is president of TheInformedTrader.com, for which he also conducts live seminars, and Steiman New Research Group, LLC. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Steiman appreciates your feedback; click here to send him an email.