Charting Cramer's Dow Forecast, Pt. 2

This column was originally published on RealMoney on Jan. 9 at 11:01 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Editor's Note: This is Part 2 of Dan Fitzpatrick's technical review of the prospects for the stocks that make up the Dow 30. Be sure to read Part 1, Part 3, Part 4 and Part 5.

Monday I started the weeklong project of charting the components of the Dow Jones Industrial Average. Jim Cramer recently focused on the fundamentals as he laid out his 2007 forecasts for the 30 Dow components. On day one of my review, I looked at the first batch of six Dow components. Here's a quick recap of the technical upshot:

• Alcoa(AA) has broken down through support at $29 and is an "avoid."
• AIG(AIG) remains above its 50-day moving average but is under distribution. With the secondary indicators all fading, I wouldn't be too bullish at this time.
• American Express(AXP) is testing its 50-day moving average. The stock bounced Monday and closed just below $60. I'd still look at $57 to define the extent of downside risk.
• Boeing(BA) remains within a tight volatility squeeze. Until that stock moves above $92 or below $87, I'm on the sidelines.
• Citigroup(C) has been consolidating recent gains and has bounced off support at $54.50. It is moving up in sync with American Express now. I'd keep a stop right around $54.
• Caterpillar(CAT) remains above $59, which defines current support. If the stock falls below that level, I'd sell. And I sure wouldn't buy this stock now -- the upside is limited.

Today, let's look at DuPont(DD), Disney(DIS), General Electric(GE), General Motors(GM), Home Depot(HD) and Honeywell(HON).

DuPont remains in an uptrend, but not all trendlines are straight. I've drawn an arc around support and resistance to draw attention to the pattern: The uptrend is flattening out.

We could use some fancy indicator to show how the price is gradually working its way back toward the 50-day moving average, but the eye works just as well.

Notice how each pullback is coming closer and closer to the 50-day moving average. Monday's close was about flat with last Friday.

The stock could fall below the 50-day moving average. If that happens, I'd sell. But until that occurs, we need to respect the uptrend.

DuPont is in the agri-chemical industry group. That group has been strong for months, but many of the stocks now are under selling pressure, so I'd keep a tight stop just below $47.

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The uptrend in Disney has been flattening out over the past few weeks. What's really obvious is the negative money flow reading. When a stock closes near the day's low on higher volume than it has had on advancing days, the effect will show up in money flow.

But Disney hasn't broken down yet, and it's always hazardous to find a top when there isn't one. So far, we're seeing only some tight consolidation. If you're long, why not protect the position with a stop just below $33? Only when the stock pops above resistance would I be a buyer.

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General Electric broke above $36 last month and has been consolidating those gains ever since. The indicators are a bit choppy, but you can see my comments in the chart.

GE has a low beta of 0.51 -- it moves half as much as the S&P -- so this slow mover doesn't pose much risk. If you're long, you might try keeping a stop below $36.

But set that stop only after you've taken into account the long price-by-volume bar at $35. There are multiple levels of potential support in GE, and that's what makes this stock fairly low-risk to hold right now.

Would I buy it here? Nope. It doesn't move that fast, and it's in the process of working off a 5% move. That could take a while.

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General Motors has fallen right back down to support at $29. The long PBV bars illustrate the high volume of trading at the $30 level. This should serve as support for any pullback. But I'd keep a stop just below $29 in case this "base" I'm seeing is actually just a rest stop on the way to $25.

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Home Depot is advancing on top of its 50-day moving average within a well-defined trading channel. Notice how the middle Bollinger Band (the 20-day moving average) delineates the bottom of the range, while the top of the range is contained by the upper Bollinger Band. That's what we see in strong stocks.

The relative strength indicator confirms this uptrend as it oscillates between 50 and 70. But the other indicators aren't so rosy. The money flow index is at a new low, reflecting four days of strong selling pressure, and the accumulation-distribution line is rolling over.

Going forward, here's what I'm looking for: After four days of selling, Home Depot is ripe for a bounce right off support. After that bounce, the real fun begins. If the stock fails to make a new high, then those bearish secondary indicators might be worth paying attention to. I'd take profits if that case plays out. On the other hand, if Home Depot fails to bounce and instead falls out of the trading channel, the next level of support should be around $37. I'd put my stop just below that level.

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Honeywell broke out of a two-month volatility squeeze on heavy volume. But over the last week, the stock has been pulling back on light volume. That's a healthy development after a breakout. If you're long, try keeping a stop back below the breakout level. And if you're looking to buy, wait for an upside resolution of the flag pattern.

Tomorrow, we'll check on Hewlett-Packard(HPQ), IBM(IBM), Intel(INTC), Johnson & Johnson(JNJ), JPMorgan Chase(JPM) and Coca-Cola(KO).

Be careful out there.

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