NEW YORK (TheStreet) - The popping of a stock-specific bubble occurs when a stock sets an all-time or multiyear high then quickly falls below its 200-day simple moving average. If the underpinnings of the stock market are healthy this should not happen!
This is the story for all six of the stocks profiled today. All have been chopped to the earnings woodshed after reporting quarterly results.
When companies from several different sectors and industries take sharp share price slashing, there's an economic story to tell. You have the largest on-line retailer, a major homebuilder, the largest fast food burger chain, the largest package delivery company, an international conglomerate of products such as elevators, air conditioners, aircraft engines and helicopters, plus the parent of Taco Bell, KFC and Pizza Hut.
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Technically all six companies are trading below their 21-day, 50-day and 200-day simple moving averages and below their five-week modified moving averages with declining 12x3x3 weekly slow stochastics. All six stocks are above their 200-week simple moving averages, which is the longer-term reversion to the mean.
Let's take a look at the stock profiles.
Amazon.com (AMZN) ($312.99) set an all-time intraday high at $408.06 on Jan. 22 then corrected to as low as $284.38 on May 9 as this bubble popped. The stock was below its 200-day simple moving average between April 3 and July 11. The bubble was re-inflating going into its earnings report on July 24 trading that day as high as $364.85. The stock plunged on a negative earnings report below its 200-day SMA at $349.76 trading as low as $305.30 as of 12:45 p.m. today.
The weekly chart is negative with its five-week modified moving average at $328.76 and its 200-week simple moving average at $250.49. Monthly and annual value levels are $279.94 and $259.67, respectively, with an annual pivot at $334.95 and quarterly and semiannual risky levels at $385.43 and $419.21, respectively.
D R Horton (DHI) ($20.70) set its 2014 intraday high at $25.23 on July 2 then closed at its 200-day SMA at $21.93 on July 24. The company reported quarterly results before the opening bell on July 24 and missed analysts' earnings per share estimates by 17%. The stock subsequently broke below its 200-day on July 25 trading as low as $20.31 as of 12:45 p.m. on Friday.
The weekly chart is negative with its five-week MMA at $22.81 and its 200-week SMA at $17.37. Semiannual and monthly risky levels are $23.01 and $25.41, respectively.
McDonalds (MCD) ($175.26) set an all-time intraday high at $103.78 on May 14 and closed below its 200-day SMA at $100.15 on July 21. The company missed analysts EPS estimates by 3 cents before the opening bell on July 22. The stock was already below its 200-day SMA sot the sellers piled on pushing the stock as low as $94.20 as of 12:45 p.m. on Friday.
The weekly chart is negative with its five-week MMA at $98.62 and its 200-week SMA at $91.55. Monthly and annual risky levels are $97.93 and $99.30, respectively.
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United Parcel Services (UPS) ($97.09) almost set a new all-time intraday high at $105.09 on July 16. The company reported disappointing earnings before the opening bell on July 29. The stock gapped below its 200-day SMA at $99.67 and traded as low as $96.12 as of 12:45 p.m. today, below my new monthly value level at $96.41 which is now a pivot.
The weekly chart is negative with its five-week MMA at $101.58 with its 200-week SMA at $81.12 and my annual value level at $80.14. Quarterly and semiannual risky levels are $103.80 and $113.60, respectively.
United Technologies (UTX) ($105.15) set an all-time intraday high at $120.66 on April 22 then held its 200-day SMA at $113.08 on July 10. There was a short-term bounce that failed at its 50-day SMA at $116.35. The company reported better that expected earnings before the opening bell on July 22 and the stock opened slightly higher, and then came a wave of selling. The stock broke below its 200-day SMA at $113.42 and traded as low as $104.25 as of 12:45 p.m. today.
The weekly chart is negative with its five-week MMA at $112.41 and its 200-week SMA at $89.81. Annual value levels are $103.38 and $92.88 with a semiannual pivot at $105.86 and monthly and semiannual risky levels at $117.29 and $122.52, respectively.
Yum Brands (YUM) ($69.40) set an all-time intraday high at $83.58 on July 15. The company reported quarterly results after the closing bell on July 16 and matched analysts estimates but guidance was disappointing. The stock broke below its 50-day SMA at $114.81 on July 17 and closed below its 200-day at $113.42 on July 29 and traded as low as $68.09 on July 31.
The weekly chart is negative with its five-week MMA at $76.59 with its 200-week SMA at $64.38. An annual value level is $64.56 with a monthly pivot at $70.41 and annual and quarterly risky levels at $76.72 and $81.56, respectively.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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TheStreet Ratings team rates AMAZON.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMAZON.COM INC (AMZN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 23.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although AMZN's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average.
- AMAZON.COM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AMAZON.COM INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($1.09 versus $0.58).
- Net operating cash flow has declined marginally to $862.00 million or 2.04% when compared to the same quarter last year. Despite a decrease in cash flow AMAZON.COM INC is still fairing well by exceeding its industry average cash flow growth rate of -16.40%.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 1700.0% when compared to the same quarter one year ago, falling from -$7.00 million to -$126.00 million.
- You can view the full analysis from the report here: AMZN Ratings Report