Goldman Sachs Calls These Stocks Buys, but the Charts Disagree
Here are four stocks that I am not enthusiastic about, despite Goldman Sachs' conviction about them for the rest of 2016: Mohawk Industries (MHK) - Get Report , Allergan (AGN) - Get Report , Cardinal Health (CAH) - Get Report and Level 3 Communications (LVLT) .
Let's take a closer technical look.
Mohawk Industries
In this daily chart of Mohawk Industries (MHK) - Get Report , we can see that prices have "rolled over" the past three to four months. Prices are below the declining 50-day simple moving average line. MHK has been crossing above and below the 200-day average line in recent days. The on-balance-volume, or OBV, line has been pointed down the past two months, suggesting that sellers of MHK have been more aggressive with the volume of shares traded heavier on days when MHK has closed lower. In the lower panel, we find no bullish divergences that could give us a positive view for the weeks ahead.
Allergan
In this daily chart of Allergan (AGN) - Get Report , we can see a significant decline the past 12 months. There is a May-June recovery, but it lacks buying enthusiasm -- notice the absence of a turn higher in the OBV line. A flat OBV line tells us that aggressive buying has not returned to AGN despite its lower price point. Prices are still below the declining 200-day moving average line but above the flat 50-day average. With no bullish divergence between the price action and the momentum study, we are not positive about AGN.
Allergan is a holding in Jim Cramer's Action Alerts PLUS charitable trust portfolio.
"Allergan is all about getting those billions from Teva for its generic drug group which should be available sometime this quarter," Cramer told TheStreet.
The stock is "very inexpensive," Cramer added, despite "dramatically higher growth rates."
It is a stock that "must be bought," he said.
Cardinal Health
In this daily chart of Cardinal Health (CAH) - Get Report , we can see a rough or irregular decline for CAH the past 12 months. The OBV line has been pointing down since December and suggests a long period of liquidation. Prices are below the declining 200-day moving average line but recently rallied above the 50-day average. CAH needs to develop a base before we can get bullish about it.
Level 3 Communications
In this daily chart of Level 3 Communications (LVLT) , we can see that prices have rolled over the past four months. Prices are above the 200-day moving average but not by much. The shorter 50-day average is above the market. The OBV line has been weakening the past two months, which foreshadows more price weakness ahead.