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Walgreen Co. is one stock on the S&P 100 due for a considerable price correction before resuming its up-trend. (ANDREW KELLY/REUTERS)
Walgreen Co. is one stock on the S&P 100 due for a considerable price correction before resuming its up-trend. (ANDREW KELLY/REUTERS)


Technical analysis: 13 U.S. stocks headed for a price correction Add to ...

Ron Meisels is the Director of Research and Monica Rizk is the senior Technical Analyst for Phases & Cycles Inc. (www.phases-cycles.com). They may hold shares in companies profiled.

What are we looking at?

Stocks with a potential of 10 per cent or more downside risk.

The screen

Stocks tend to stay relatively close to their 40-week moving average (40wMA). However, when they move significantly higher or lower (more than 10 per cent), they are likely to close this “gap” by going through a price correction to get closer to this average.

The 40wMA is the average closing price for the stock over a 40-week period. Charting the moving average week by week gives us a sense of investors’ behaviour. Are they growing more (or less) enthusiastic about the company’s outlook and are they more (or less) likely to purchase the stock?

We limited our pool to the stocks that are part of the S&P 100 index and to those that have a rising 40wMA, and then selected those that are at least 10 per cent over this average. These are the stocks that are most likely to have a considerable correction before they resume their up-trend.

What did we find?

We found 13 stocks that meet these criteria. Dow Chemical has appreciated 33 per cent from December, 2013, to the present, and now shows the largest gap of 19 per cent between its current price and its 40-week moving average.

Six stocks followed and they tied at a 15 per cent gap from their 40-week moving average: CVS Caremark, General Dynamics, Halliburton, Lockheed Martin, Raytheon and Walgreen.

In the adjoining table we summarize our findings. A more detailed list covering a pool of about 350 U.S. stocks is available by request at info@phases-cycles.com.

S&P 100 stocks with the most downside risk

CompanySymbol$ Price
(Mar. 25)
risk %
Dow ChemicalDOW-N50.6441.00-19%
Raytheon Co.RTN-N98.0683.00-15%
Lockheed MartinLMT-N160.57136.00-15%
CVS CaremarkCVS-N74.9564.00-15%
General DynamicsGD-N107.6592.00-15%
Norfolk SouthernNSC-N97.3884.00-14%
Union PacificUNP-N186.98164.00-12%
Walt DisneyDIS-N79.5570.00-12%
U.S. BancorpUSB-N43.4238.50-11%
Merck & Co.MRK-N55.1949.50-10%

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