Cigarettes Used to be Good For You, The Stocks That Is

• Posted by Greg Harmon
• on October 10th, 2011

With the broad market index ETF’s all up over 10% it is hard to find stocks that have not had a good run. For one sector, tobacco stocks, the run may be about to go up in smoke. The three charts below for Lorillard, $LO, Altria Group, $MO, and Reynolds American, $RAI, show price action that with Japanese Candlestick patterns suggest a pullback may be coming. Let’s take a look.

Lorillard, $LO

Lorillard, $LO, broke out of a channel and has been running higher since. The full run up from the September 23 low has gained $15. But the last two candlesticks, an Evening Star and Shooting star, are signs of a potential reversal. They need to be confirmed with lower close tomorrow, but worth keeping an eye on. There are other signs that raise awareness for a stall as well. The Relative Strength Index (RSI) is about to break over 70, it is out of the upper Bollinger band, and the target from the channel break was achieved at about 118.

Altria Group, $MO

Altria Group, $MO, broke above the previous topping area between 26.85 and 27.10 and has been moving higher. The 3 week run up has added over 10% to the price. But Monday’s Hanging Man candle, was also a Solid Black candle, indicating that although it was a close over Friday’s close the intra-day price action was bearish, opening higher and closing lower. The Hanging Man needs to be confirmed to signal a reversal as well, but it is also outside of the upper Bollinger band.

Reynolds American, $RAI

Reynolds American, $RAI, has also had a big run higher over 2 months from 31.50 up to near 40. But it printed an Evening Star, potential reversal candle, that was also a Solid Black candle. The Evening Star needs to be confirmed lower but it also has the RSI at 70 and is out of the upper Bollinger band.

You may be able to enjoy these stocks for a while more. They are in uptrends. But think of this time as a period when you are just learning that they cause cancer, and so it is at least time to look for protection, and cutback taking some profits.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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