Why GE, 3M, United Technologies Will Wither Under a Strong Dollar

NEW YORK (TheStreet) -- The stronger dollar will hurt earnings of U.S. multinational companies, including three Dow components: General Electric  (GE) , 3M (MMM)  and United Technologies  (UTX) . And given the risk, investors should consider booking profits on these stocks ahead of third-quarter earnings in October. Here's why, and how you can protect yourself.

Sales made in foreign currencies must be converted into dollars. A weaker foreign currency converts to fewer dollars, reducing revenue and earnings per share. The strong dollar means more U.S. companies will miss analysts estimates when third-quarter earnings season begins in October.

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These daily and weekly charts below illustrate the currency risk for the euro vs. the dollar and explain the correlation between a weak euro and lower U.S. stock prices.

The "Death Cross" Chart

Let's look at a price pattern for the euro vs. the U.S. dollar on the daily chart below.


Courtesy of MetaStock Xenith

The euro had been trading above a rising 200-day simple moving average (green line) until July 2, when the third quarter began. The break below the 200-day provided a warning that the rising trend for the euro had shifted to a declining trend. The declining trend for the euro was confirmed when the 50-day simple moving average (blue line) declined below the 200-day on July 7.

This negative moving average crossover is known as a "death cross" to technical traders.

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