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I believe in using fundamental analysis when evaluating which stocks to invest in, but I also think it is important to look at the technical side as well. After doing fundamental analysis, I like to see how a stock looks based on the charts, including what the 50 and 200 day moving averages are and what the relative strength index is before deciding to buy. When evaluating this data, you can find stocks that appear to be starting what might be a significant new uptrend as well as stocks that are in a serious downtrend. One potential sign of this is when the 50 day moving average crosses below the 200 day moving average. This event is called a "Death Cross Formation" and it is viewed as a very bearish sign. You can read more about the Death Cross Formation here. To learn more about technical analysis in general read this. If you are serious about making money in stocks, I strongly encourage investors to be aware of how a stock looks in terms of the charts as this can give you an edge over using just fundamental analysis.

About 10 days ago, I wrote an article about finding uptrends and discussed 10 stocks that had formed a Golden Cross on their charts. All of those stocks are up, except for Bank of America (NYSE:BAC), which is down a little. The other nine stocks were up from a little to a lot. The top gainers were Level 3 (NYSE:LVLT), and Micron Technology (NASDAQ:MU), with both of them up about 12%. You can read the Golden Cross article here.

The companies below all have either a "Death Cross Formation" recently appearing on their chart or will likely have one soon. To view the charts for any of these stocks in the future, go here. It will take time and improved results or some good news for these companies to reverse the bad looking charts and possibly turn them into Golden Cross Formations. Sometimes, stocks that have terrible charts are bargains, other times they just keep getting worse. These names will be interesting to watch for any trend reversals. Here are the companies and charts:

Pacific Sunwear of California (NASDAQ:PSUN) shares are trading at $3.34. These shares have a 52 week range of $2.92 and $6.84. The 50 day moving average is $4.28 and the 200 day moving average is $4.69.

Fundamentals: Earnings estimates for PSUN are for a loss of 75 cents per share for the current fiscal year and a loss of 44 cents for the next. It does not look good here, but one positive is that an insider at PSUN keeps buying shares, even though they keep going lower.


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Gulf Resources, Inc., (GFRE) is trading at $5.54. These shares have a 52 week range of $5.50 and $12. The 50 day moving average is $8.81 and the 200 day moving average is $9.02, so the shares are trading very close to the 52 week low.

Fundamentals: Last week, Gulf Resources reported that fourth quarter net income was $12.0 million, or $0.34 and $0.35 per basic and diluted share, respectively, an increase of 77.5% from $6.8 million, or $0.21 per basic and diluted share a year ago. However, that did not stop the stock from dropping about 8% on Friday and the shares hit a new 52 week low. This company is based in China, and investors appear to have serious doubts about this company. Many Chinese companies have had accounting and other issues and this has cast doubt on the whole sector.


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Coinstar, Inc. (CSTR) is trading at $46.11. These shares have a 52 week range of $32.27 and $67.56. The 50 day moving average is $43.36 and the 200 day moving average is $48.91, so these shares are trading up a little from recent lows.

Fundamentals: Estimates for CSTR are about $2.76 per share in 2011. This stock dropped significantly when they last reported earnings and guidance that did not please investors. Coinstar is set to report earnings around April 25th, so that is likely to determine whether or not this stock has the strength to rebound. If they release another disappointing report in April, and I am sure many investors will leave this stock for good.

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Johnson & Johnson (NYSE:JNJ) is trading at $58.98. These shares have a 52 week range of $56.86 and $66.20. The 50 day moving average is $60.16 and the 200 day moving average is $60.04, so these shares are trading close to the 52 week lows. When you look at this chart, you can see the 50 day moving average is just about to cross below the 200 day moving average. Although this stock has not reached this point yet, there is not much that could stop it from happening.

Fundamentals: Estimates for JNJ are for a profit of $4.84 per share in 2011, and profits of $5.12 per share in 2012. Book value is stated at $20.66. JNJ has had a number of issues with some of their products, which has caused significant concern for investors. It may take time for investors to feel confident again. JNJ pays a healthy dividend of $2.16 per share which is equivalent to a yield of 3.7%.

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Merck (NYSE:MRK) is trading at $32.57. These shares have a 52 week range of $30.70 and $38.01. The 50 day moving average is $32.64 and the 200 day moving average is $34.38, so these shares are trading close to support levels (the 50 day moving average).

Fundamentals: Earnings estimates for MRK are about $3.69 per share in 2011 and $3.85 for 2012. This puts the PE ratio at about 8. There is a possibility for higher dividends in the future. Book value is stated at $17.64. MRK pays a healthy dividend of $1.52 per share which is equivalent to a yield of 4.7%. I think these shares are a bargain, the PE ratio is low and the dividend is almost 5%, so I have been buying Merck shares in the recent drop, in spite of the negative looking chart.

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F5 Networks (NASDAQ:FFIV) is trading at $95.67. These shares have a 52 week range of $60.50 and $145.76. The 50 day moving average is $114.80 and the 200 day moving average is $106.20, so the shares are trading well below these support levels. Like JNJ, this stock has not yet formed a death cross formation on the chart but it appears to be only a matter of time before it does.

Fundamentals: Earnings estimates for FFIV are for a profit of $3.62 per share in 2011 and $4.39 in 2012. Book value is stated at $13.32. Investors have been concerned about the growth rate slowing for this company, as recent earnings and guidance were weaker than expected. Some analysts recently downgraded the stock which you can see here.

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American Superconductor (NASDAQ:AMSC) is trading at $24.04. These shares have a 52 week range of $21.70 and $38.88. The 50 day moving average is $26.63 and the 200 day moving average is $29.89, so the shares are trading well below these key support levels.

Fundamentals: Earnings estimates for AMSC are about $1.33 per share in 2011 and $1.26 for 2012 Book value is stated at $9.86 per share. These shares have been drifting lower since February and then dropped even more when AMSC announced they would be acquiring a Finnish company called "The Switch Engineering" for about $265 million. You can read more about that deal here.

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Grubb & Ellis (GBE) is trading for about $1. These shares have a 52 week range of 91 cents and $2.35. The 50 day moving average is $1.15 and the 200 day moving average is also $1.15. These shares are trending lower, and if they trade for below $1 for too long, they could be at risk for delisting from the NYSE. You can see the 50 day moving average just touched the 200 day average and is poised to break below it.

Fundamentals: Estimates for GBE are for a loss of about 75 cents per share in 2011 and a loss of 55 cents for 2012. I do not think this company has a good balance sheet and these shares are speculative, the one positive is that an insider at GBE continues to buy shares. GBE recently announced they are exploring a sale or merger and even that hasn't helped the stock. You can read about that here.

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The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.

Source: Major Downtrends: 8 Stocks With a Death Cross Formation