Going over the list of the top 10 S&P 500 stock market performers for the month of June with a technical eye to the future, I found that just a few of these names are likely to continue their recent strong gains in the third quarter. The rest could see price declines ahead.
Here are the five stocks that could be in trouble over the rest of the summer.
In this daily chart of Marathon Oil (MRO - Get Report) , we can see that MRO is above the flat 50-day simple moving average line and the flat 200-day average. These flat moving averages suggest that there is little strength to the current trend. The on-balance-volume, or OBV, line has been flat for the past two months and tells us that neither buyers nor sellers of MRO have been aggressive in adding or reducing positions. There is a bearish divergence in the April, May and June period as prices rose and the momentum readings weakened.
To me, it looks like the recovery from the February low is in trouble as we move into the third quarter. I would look for MRO to trade sideways to easier in the $15-to-$12 area in the weeks ahead.
In this daily chart of Gap (GPS - Get Report) , we see that unlike the other charts, GPS has been in a downtrend for much of the past 12 months. The rally in June looks like a recovery rally in a long-term bear trend. The OBV line has picked up in June but it is hardly a multi-month uptrend pointing to sustained price strength. The slope of the 200-day moving average line is still negative, and the slope of the shorter 50-day line is not even flat yet.
GPS might crawl higher toward $25, but if the overall market weakens in the third quarter, GPS is more likely to retest its recent lows, in my opinion.
In this chart of Michael Kors (KORS) , we can see a pretty volatile picture for KORS in the past year. The OBV line turns up in February to confirm the rally but turns flattish for the next several months. Because the OBV line can lead prices, the line is not pointing to renewed strength for KORS at this time. KORS is above its 50-day and 200-day averages, but like the OBV line, they are mostly flat and could be tested/broken in the weeks ahead.
KORS could rally towards $55 in the third quarter, but a decline to $45 or even $40 would not surprise us either.
In this daily chart Transocean (RIG - Get Report) , we can see a mixed picture for RIG. On the plus side, prices have been working on a bottom pattern, but a rally above $14 -- above the March high -- is needed to complete the base. Prices recently popped to the upside over the 50-day and 200-day moving averages, but the OBV line neutral and momentum has been diverging.
RIG may work higher this month, but I consider it a "prove it to me" stock. RIG needs to prove that it can rally in the face of softer crude oil prices and a strong dollar. I suspect RIG will make its base pattern bigger rather than rally more in the short-run.
In a recent update on Hershey (HSY - Get Report) on Real Money, just about an hour before the news that Mondelez International (MDLZ - Get Report) offered $23 billion for the candy company (which Hershey rejected), we looked for HSY to rally. HSY surged to the upside, and its future short-term movements will be driven by deal/no deal stories.
This is not the kind of market I like to participate in. I'll take a pass.