Trading Nation

Five Dow stocks are in bear market territory. Why Merck and General Electric may be the ones to buy

Trading the five Dow stocks in bear market territory

The major indexes tried to recover Friday after a massive sell-off in the previous session that briefly sent the Dow into correction territory. The Dow and are now on track for the worst March performance since 2001.

The recent selling pressure is putting a dent in many large-cap Dow components, which are now sitting in bear market territory.

General Electric is the biggest Dow laggard, down more than 56 percent from its 52-week high, while Walmart has fallen 21 percent, Proctor & Gamble and Merck are both down 18 percent, and energy giant Exxon Mobil has dropped around 17 percent from its highs.

Of these names, Craig Johnson, senior technical strategist at Piper Jaffray, said Merck's chart shows that the stock looks poised for a breakout.

"Here's a stock that has corrected right back to the uptrend support line off of the late 2012 lows … [this] has been a good indication to us that perhaps momentum to the downside is fading and this is where we want to be buying the stock so we would be a buyer of Merck at these levels," Johnson said Thursday on CNBC's "Trading Nation."

On the other hand, Larry McDonald, founder of The Bear Traps Report, said he sees better value in GE.

The industrial giant has been massively underperforming the broader market over the last 12 months. GE's shares are down 55 percent, while the S&P 500 is up nearly 13 percent in the same time period.

Nevertheless, "the risk-reward in GE is fantastic … you're buying GE at a massive discount to where some of the great value investors in the world own this stock. You might have 10 percent down side, but your upside is 30, 40 percent – what we call a bear market rally in the name in the next quarter or two," McDonald said Thursday on "Trading Nation."

GE shares were trading around $13.40 late morning Friday.