Bear Market Fear – Blue Chips Drop

Bear Market Trashing Blue Chips

There are many things to look at when it comes to confirming a bear market. One of the things I look at is how long big multinational Blue Chip Stocks can hold up. Today the losses were huge across the board. This rarely if ever happens in a Bull Market. Even a bull market in correction will see pressure on multinational Blue Chips, but not large losses and now after a week of selling, the big multinational’s are giving back their recent gains. Many are down 10% and some are down 15%.

This tells me that any rally has to be suspect and sold into. This is not an environment for buy and holders unless they have a long term outlook or are seeking dividend income.

Below are just a few that I follow.

Bear Market Trashes McDonalds Stock – Down 7.5% From Recent High

Bear Market Trashes McDonalds Stock - Aug 8 2011

McDonalds is down 7.5% and both on Friday and again today it has decisively broken the 200 day Exponential Moving Average. I indicated back on May 23 2011 when McDonald’s stock (Select the link and scroll to May 23 2011) broke through $80.00 that I felt the stock was over valued for my strategy of selling puts against the stock.

I now believe McDonalds stock could easily pull back to the Upper 70’s before it even tries to make a new high. The chance of it trying to make a new high I believe is very limited, particularly with the Bear Market moving in the worst period for bear markets – September and October. Both of these months have been typically terrible months for bear markets.

Bear Market Trashes PepsiCo Stock – Down 12% From Recent High

Pepsico broke decisively through its 200 day Exponential Moving Average a couple of weeks ago and is trying to make a base at this level. This is a huge multinational company, the world’s biggest snack provider. I believe the stock will fall below $62.50 and I plan to sell puts at the $60.00 and under level. With any more panicking Pepsi Stock could easily fall below $60.00.

Bear Market Trashes PepsiCo - August 8 2011

Bear Market Trashes Yum! Brands Stock – Down 15.6% From Recent High

The bear market is really smashing YUM! Brands Stock. Down 15.6% from its most recent high, Yum brands sliced through the 200 day exponential moving average easily and now is trying to bottom. I started to sell puts again on YUM! Brands today as I believe anywhere below $48.00 is a great price for this rapidly growing company. YUM! Brands could easily fall to $46 or even $45.00 in a panic. That’s the great thing about selling naked puts on a company even in a bear market. It affords me a better price and the chance to change my mind and roll even lower with the company.

Bear Market Trashes YUM! Brands Stock - August 8 2011

I have more to post but that’s it for now as I am back to trading my stocks!

 

  • James

    What are your thoughts on JNJ? Down around 10% from its high. Possible buying opp in high 50s all the way down to 48-50 area

  • admin

    I wrote an article this evening about the plunge in equities today. I believe there is more selling to unfold yet. Big institutional investors started selling today which can only be a bad sign. In the bear market of 2008 JNJ got down to the mid 40’s. I would wait and see how the upcoming trading days play out. Just my opinion of course, but today I bought to close some puts I had sold and took losses to get out.

  • James

    Yes, mirroring my thoughts…I’ve been eyeing those ’08 lvls, as I wasn’t cash heavy at that time…I do wonder though – if everyone is looking to the 08-09 lows as a possible target, then maybe we never even get that close (or we end up crashing through)…gl gt and thanks for all the time you put into the site

  • admin

    Overall I am not sure of the 2008 crash in relation to this market. I think overall the bear market started on big drops which is highly unusual and shows that many investors are scared of the market. Probably with good reason. I closed a number of puts yesterday and again today as I rolled lower yesterday.
    I see nothing wrong with owning the big multinationals going forward, but I see no reason to rush to own them at these levels.
    I think the big question is to ask yourself, is the selling over and somehow I doubt that.

  • James

    What are your thoughts on JNJ? Down around 10% from its high. Possible buying opp in high 50s all the way down to 48-50 area

  • James

    Yes, mirroring my thoughts…I’ve been eyeing those ’08 lvls, as I wasn’t cash heavy at that time…I do wonder though – if everyone is looking to the 08-09 lows as a possible target, then maybe we never even get that close (or we end up crashing through)…gl gt and thanks for all the time you put into the site

  • Teddi

    Overall I am not sure of the 2008 crash in relation to this market. I think overall the bear market started on big drops which is highly unusual and shows that many investors are scared of the market. Probably with good reason. I closed a number of puts yesterday and again today as I rolled lower yesterday.
    I see nothing wrong with owning the big multinationals going forward, but I see no reason to rush to own them at these levels.
    I think the big question is to ask yourself, is the selling over and somehow I doubt that.

  • Teddi

    I wrote an article this evening about the plunge in equities today. I believe there is more selling to unfold yet. Big institutional investors started selling today which can only be a bad sign. In the bear market of 2008 JNJ got down to the mid 40′s. I would wait and see how the upcoming trading days play out. Just my opinion of course, but today I bought to close some puts I had sold and took losses to get out.