With the economy slowing down and the market getting hit, there will be many charts like this one. This company said that a weakened consumer will cause earnings to miss analyst projections, which resulted in a big selloff. However, you could have caught it before, when the stock was almost 10% higher. Let’s study the chart to see how.
Consumer Woes
Newell Rubbermaid (NWL) is a popular consumer and housewares products company that has fallen on hard times recently. The company cut its full-year profit estimates to about $1.60 per share from a previous estimate of $1.67 per share. CEO Mark Ketchum stated that over two-thirds of sales come from the U.S. where the consumer is hurt by high oil prices and a weak job market. “Persistent softness in the U.S. economy and increased inflationary pressure have caused us to revise our outlook for the balance of the year,” Ketchum said in the statement.
The stock fell about 12%, which was the biggest drop since 2008. Earnings estimates had been coming down for the current quarter even before the warning. Sixty days ago, the estimate called for 51 cents per share, which dropped three cents until the company dropped the hammer.
The Chart
Obviously, the stock is in a vicious downtrend, spurred on by management’s earnings warning. Big institutions were actively selling the stock as evidenced by the massive volume the past few days. It would take a brave investor to try and bottom fish here, but it might be due for an oversold bounce, but that doesn’t make the risk/reward ratio favorable in my opinion.
I think the real key to the chart occurred at the beginning of May. Notice that the 50-day moving average was taken out on high volume, which was followed by more selling the next day. There was a feeble bounce attempt, followed by the 200-day moving average being violated in late-May.
Smart technical traders would have sold following the first violation, but there is no excuse for not selling after the second one. Both of these selling points would have saved investors a lot of money before the recent earnings warning. This is one case where textbook technical analysis would have been a terrific value-added feather in one’s cap.
Getting Technical: This Stock’s Broken Chart Means More Downside is an article from: 
