Beware April Fool’s Stock Charts: Worth
Online Producer
Charts show that a few stocks might be overextended and due for declines, market technician Carter Worth of Oppenheimer said Monday.
On CNBC's "Fast Money," he said that charts highlighted stocks that were up "at least 15, up to 30 and sometimes more, stocks that are just basically fully priced, if one can make that judgment, and crowded, and therefore dangerous."
Looking at chart activity in Gilead, Worth noted a stock price climbing higher from a trend line – specifically, "how long they've gone since they've had some sort of check back, some sort of doubt, some sort of give-back, where they've touched back to this smoothing mechanism, 150-day moving average."
Worth said that going too long without a pullback suggests that a stock is overdue for one.
"Once you go into the third quarter, past six months – seven, eight months – without anyone questioning it, you're getting into an issue," he said. "And that's exactly what's going on here in Gilead."
Worth noted similar stock charts for Johnson & Johnson, Travelers and Kroger.
"Same principles here, crowded trade, priced for perfection, risk-reward asymmetrical," he said.
Trader disclosure: On April 1, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Grasso is long AAPL; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long BAC; Steve Grasso is long GOOG; Steve Grasso is long GDX; Steve Grasso is long HPQ; Steve Grasso is long LF; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MU ; Steve Grasso is long PXD; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long VLO; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long MSFT; Karen Finerman is long GOOG; Karen Finerman is short SPY; Karen Finerman is short IWM; Pete Najarian is long AAPL; Pete Najarian is long BBRY; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is long AMZN CALLS; Pete Najarian is long OKE CALLS; Pete Najarian is long PFE; Pete Najarian is long MRK; Pete Najarian is long BMY.
