Here are five stocks I would avoid despite Morgan Stanley's belief they should be bought on a so-called Brexit pullback.
Morgan Stanley does not have a technical analyst on staff, so it misses the important point that the stock market turned lower several weeks ago.
My "no buy list" includes ServiceMaster Global (SERV) - Get Report , Starbucks (SBUX) - Get Report , Cheniere Energy (LNG) - Get Report , Signature Bank (SBNY) - Get Report and Synchrony Financial (SYF) - Get Report . Let's take a closer look at their stock charts.
In this daily chart of ServiceMaster Global (SERV) - Get Report , we can see how rallies in the price of SERV to and above the $40 level have all failed. A February peak marks the high of the past 12 months. Prices have crossed above and below the 50-day and 200-day averages, but a weakening on-balance-volume, or OBV, line suggests that the recent turn down from $40 could see a break of support around $35. A break below $35 should complete a top formation and generate further declines in the third quarter.
Despite all the positive news flow about Starbucks (SBUX) - Get Report , the price has been topping out for months. SBUX is below the declining 50-day moving average line and below the flat 200-day average. The OBV line has been declining for months, telling us that sellers have been more aggressive. A close below $54 could accelerate the declines.
The good news on SBUX appears to be priced in.
Starbucks is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Jack Mohr, Action Alerts Research Director, wrote in a recently weekly commentary:
We continue to like the long-term growth in this name and appreciate its unparalleled brand loyalty. As for its exposure to Europe, we think Starbucks is well-positioned as the market reacts to Brexit given that Europe/Middle East/Africa comprises a mere 6% of sales, rendering the currency fluctuations within Europe/UK relatively de minimis. Plus, a mitigating factor is that unfavorable currency translation on the top line is countered by the inverse relationship with the bottom line as the cost of sales (opex) comes down with weaker currency (cost of purchasing products -- primarily roasted coffee -- along with store occupancy costs come benefits from favorable FX exchange). Ultimately, the company's biggest business is in the Americas and China/Asia Pacific, so, yes, it generally benefits from a softer dollar relative to the euro, but it also absorbs the FX headwinds pretty well. In addition, the company is well diversified geographically. We reiterate our $68 target.
In this daily chart of Cheniere Energy (LNG) - Get Report , we don't have a toppy looking chart, but we do have a chart that is not under accumulation and will probably just go sideways or slightly lower from here. Prices are below the declining 200-day average line, and the OBV line is neutral. Cheniere Energy is going to need a much bigger base to prompt me to recommend a long position.
In this daily chart of Signature Bank (SBNY) - Get Report , we can see an early December peak and subsequent downtrend. Prices are below both the declining 50-day average and the declining 200-day average. The OBV line has been in a downtrend since early December, telling us that sellers have been dominant for the past seven months. Prices broke down to a new low last week, without even a bullish divergence from the momentum indicator.
With no signs of a bottom here, I find no compelling technical reason to probe the long side.
Synchrony Financial (SYF) - Get Report was knocked for a loop in June as the rally from the February low was quickly ended. Prices gapped down below the 50-day and 200-day averages. The OBV line turned down too. Momentum is not giving any early signs of a bullish divergence. A long repair process is going to be needed to make the chart of SYF more attract to the bulls.