This article originally appeared on Jan. 29, 2014, on RealMoney.com. To read more content like this plus see inside Jim Cramer's multimillion-dollar portfolio for FREE... Click Here.
The number of stocks in the S&P 500 above their 50-day moving averages fell by nearly 42% last week, from more than 68% to less than 39%. Many are in the process of testing that average, and today I want to review six of them.
Three that are not making the grade are American Express (AXP), Adobe Systems (ADBE), and paper maker KapStone Paper and Packaging (KS). The daily chart shows shares of American Express breaking several key levels of support, currently trading below a horizontal resistance/support line drawn off the November highs and the December low, an uptrend line drawn off the November and December lows, and its 50-day moving average.
Adobe is forming a gravestone doji candle just below its 50-day moving average and just above the horizontal line drawn off its November high. A gravestone doji is identified by a narrow opening and closing range near the lower overall range of the candle and has all the negative connotations its name implies. The stock price remains above an intermediate term uptrend line drawn off the lows since September, but it looks vulnerable.
KapStone Paper has taken out an uptrend line drawn off its lows since November and its 50-day moving average, trading down nearly 2% recently in today's session. A close at this level would also remove any support that was being supplied by this month's low.
The better performers on their 50-day average test are H&R Block (HRB), Questar (STR), the natural gas utility, and staffing-and-business services company Robert Half International RHI. The chart shows H&R Block up nearly 3% recently in today's session, forming a bullish two-day reversal candle combination. A bounce off an uptrend line extending from the October low on Friday has continued in today's session and taken out the 50-day moving average.
Questar bounced off its 50-day average last week and the momentum into today's session is taking it above a resistance line drawn off its November and December highs. A confirmed break would establish a double bottom o (RHI)n the chart.
Robert Half is extending last week's bounce off its 50-day average and a close near current levels would establish a bullish two-day reversal candle combination, similar to the one seen in November, and re-establish the uptrend.These stocks need to close above or below their respective levels of support and resistance before they become trading candidates and they require disciplined trailing stops.
At the time of publication, Moreno had no positions in the stocks mentioned.