These five defensive stocks may look safe and stable from a fundamental perspective, but the technical picture tells a different story. Here's a closer look at the stock charts of Hormel Foods (HRL - Get Report) , Verizon (VZ - Get Report) , Sanderson Farms (SAFM - Get Report) , UnitedHealth Group (UNH - Get Report) and AT&T (T - Get Report) .
This daily chart of Hormel (HRL - Get Report) shows a stock in transition. Hormel is transitioning from an uptrend to a sideways trend. The 200-day moving average line is rising, but the slope of the 50-day average has turned down. The on-balance-volume, or OBV, line has moved up and down with the price action and fails to provide an independent look ahead.
Hormel needs to overcome resistance up around $44 while a close below $38 and then $37 (the 200-day average) should shake out recent longs.
Verizon traded sideways the second half of 2015 and then came alive with a rally from a January low to an April zenith. Prices have softened from that April peak and are below the flat 50-day moving average line. The most interesting technical clue is the flat OBV line for the past 12 months the OBV line has been lifeless. It is going to be difficult for VZ V to rally if there isn't buying support behind the move.
Sanderson Farms (SAFM - Get Report) made a saucer bottom July to December. Prices strengthened in the New Year, but the OBV line has stalled/weakened the past six weeks after climbing from a September low. Prices are above the rising 50-day and 200-day moving average lines, but the 50-day has been narrowing towards the 200-day line.
The 12-day momentum study shows a bearish divergence vs. the price action the past three months as prices have been firm and the momentum has been unchanged. Weakness below $85 should hurt the technical make up and precipitate further weakness.
This daily chart of UnitedHealth (UNH - Get Report) also shows a disconnect between price and volume. Prices rallied this year from $110 to $135, but the OBV line barely improved. Volume (second panel) did not expand, and the OBV line hardly moved. Momentum in the lower panel made a bearish divergence. As prices rose, the momentum study weakened.
UnitedHealth is testing the rising 50-day moving average line. A close below this line could start a downward reaction and test of support around $120.
AT&T (T - Get Report) made a small bottom in August/September and then staged a rally in January. At the end of March and in the middle of May, AT&T has made a small double-top formation. A decline below $37.75 is likely to develop soon as the OBV line has not kept up with the price action. The momentum study in the lower panel indicates a bearish divergence between price and momentum.
With volume and momentum failing to confirm the price strength, I would look for AT&T to weaken in the days and weeks ahead.