Utility holding company Sempra Energy (SRE) is another stock that's looking toxic right now -- in spite of the 21% rally that shares have enjoyed for most of this year. That's because Sempra is forming a double top, a price pattern that typically indicates a reversal to the downside.
A double top is formed by two swing highs that come in at approximately the same price level. The two tops are separated by a trough (at $64 in SRE's case) -- that's the breakdown level. A move below that low sends traders the sell signal in shares of this stock. Even though SRE has been moving higher in the last week, it's hitting its head on resistance at the 50-day moving average. That's a weak resistance level to begin with, so the fact that buyers are struggling to maintain control here isn't a good sign.
I don't think that it's time to panic about this stock just yet (it hasn't broken down yet, after all), but I wouldn't be a buyer here.
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