2012 had been going well for tobacco giant Reynolds American (RAI - Get Report). At the start of August, shares were up double-digits, and the stock was consolidating sideways, giving investors a chance to take a breather after a quick rally took shares from $38.50 to $46 in a matter of weeks. But the consolidation channel ended up getting broken to the downside, sending a bearish signal for RAI investors.
Since then, shares have found support at $43, but it still makes sense to sell here. There's a lot of downside risk left in Reynolds right now -- even with the firm's hefty 5.4% dividend yield factored in.For starters, our support level at $43 isn't exactly a strong price level; so far, we've only got one "touch" of that price, versus four reversals at newfound $44.50 resistance. That makes downside price action more likely than upside right now. Volume supports that too. The stock's biggest volume spike came on a failed test of resistance, indicating that the most participation in RAI came when sellers were smacking this stock lower. I'd recommend waiting for a more meaningful support level before being a buyer. At least you'll get the possibility of an even bigger yield!