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Downgrades Challenge Dow Theory Buy

When key stocks lose their buy ratings, they become momentum trades which results in a new twist to my "buy and trade" strategy.

The strategy to reduce positions on strength to risky levels remains in play.

But with weaker underpinnings you may want to consider employing a sell stop on a close below a value level instead of buying weakness to a value level for stocks not rated buy.

An alternate exit strategy when trading stocks without a buy rating is to employ a sell stop on a weekly close below a stock's five-week modified moving average (MMA).

Reading the Table

OV / UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a Sell, a "3-Engine" rating is a Hold, a "4-Engine" rating is a Buy and a "5-Engine" rating is a Strong Buy.

Last 12-Month Return (%): Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage.

Forecast 1-Year Return: Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months.

Here's my analysis of the downgraded Dow Industrials and Dow Transports stocks:

Boeing (BA) ($79.08) traded to a new 2013 high on Wednesday at $79.28, just shy of its $80.65 high on May 2, 2011. The weekly chart profile is positive with the five-week modified moving average (MMA) at $76.48. My monthly value level is $72.96, with a weekly pivot at $74.07 and my quarterly risky level at $79.34.

Cisco Systems (CSCO) ($21.72) traded to a new 2013 high on Wednesday at $21.79. The weekly chart profile is overbought with the five-week MMA at $20.87. My annual value level is $17.77 with a monthly pivot at $21.08 and semiannual risky level at $22.43.

CSX (CSX) ($23.20) traded to a new 2013 high on Wednesday at $23.80, but remains shy of its $27.06 high on July 7, 2011. The weekly chart profile is overbought with the five-week MMA at $22.25. My monthly value level is $20.76, with a quarterly pivot at $22.31 and semiannual risky level at $28.19.

Chevron (CVX) ($118.47) traded to a new multi-year high at $118.78 on Wednesday. The weekly chart profile is overbought with the five-week MMA at $115.34. My semiannual value level is $111.22, with my monthly risky level at $119.35.

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