A conglomerate is a combination of two or more corporations engaged in entirely different businesses but rolled together into one corporate structure. This setup usually involves a parent company and several (or many) subsidiaries. Often, a conglomerate is a large, multinational, multi-industry company.

Because they of their global reach, conglomerates are also a good proxy for the global economy. According to this measure, things aren't looking good. Many conglomerates have recently fallen back beneath their 200-day moving averages after several months of trading above this level. With the recent weakness in this group, it's possible that they are forecasting further deterioration for the general markets. (For further reading, check out Conglomerates: Cash Cows Or Corporate Chaos?)

General Electric Company (NYSE:GE) is one of the largest companies in the world and the recent weakness in the stock doesn't bode well for the markets. GE had been in a healthy trend until the wheels fell off in May, and the stock fell sharply leading into the "flash" crash. While it bounced sharply off the low set that day, it quickly revisited those lows a few days later. It has since settled into a trading range near those lows at approximately the $15-$16 level. GE is currently testing its lows again; if it breaks down it may encounter more selling pressure.

Source: StockCharts.com

3M Company (NYSE:MMM) is another large conglomerate that is testing an important level. While MMM is well above its recent lows, it is in the process of testing its 200-day moving average. This average is often the demarcation point for stocks in a longer term uptrend or downtrend. Stepping back, MMM is still trading in a large base after a rally from its bear market lows. It briefly broke under this base in June but quickly found buyers. It failed at its 50-day moving average and if it fails here at its 200-day moving average it could drop for a retest of its June lows near $72.50. This would likely signal a larger breakdown in MMM that could push it back under its base.

Source: StockCharts.com

Textron (NYSE:TXT) is another conglomerate testing the bottom of its base. TXT has found strong support near $18 over the past several months and appears to be headed for another test of this level after failing a test of the 200-day moving average. This level has been a floor for this stock dating back to September 2009, and a break below it would leave many traders underwater. Overall, TXT remains in its base, but should be monitored closely to see how it reacts to this test.

Source: StockCharts.com

Danaher Corporation (NYSE:DHR) is a conglomerate that hasn't yet broken under its 200-day moving average. While it has suffered through the recent weakness in the markets, it remains in its base and the level to watch for support is near $38 per share. This level is above its 200-day moving average and combined with the average, it should hold buyers.

Source: StockCharts.com

Bottom Line
While the conglomerates have not broken down and could find support at these levels, the recent weakness is signaling an unhealthy environment. Because these stocks reach out across the globe, the implications of an unhealthy environment span several markets overseas. Traders should continue to practice patience as the markets attempt to find some footing. In the meantime, the conglomerates are a good group to watch for clues about larger global trends.

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    ChartAdvisor for November 27 2015

    Weekly technical summary of the major U.S. indexes.
  2. Chart Advisor

    Pay Attention To These Stock Patterns Playing Out

    The stocks are all moving different types of patterns. A breakout could signal a major price move in the trending direction, or it could reverse the trend.
  3. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  4. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  5. Technical Indicators

    Using Pivot Points For Predictions

    Learn one of the most common methods of finding support and resistance levels.
  6. Chart Advisor

    Watch These Stocks for Breakouts

    These four stocks are moving within price patterns of various size, shape and duration, and are worth watching for a breakout
  7. Chart Advisor

    ChartAdvisor for November 20 2015

    Weekly technical summary of the major U.S. indexes.
  8. Chart Advisor

    Like Ranges? These Are Stocks to Consider

    Whether you want to trade the price fluctuations within a range, or await a breakout, here are four stocks for you.
  9. Chart Advisor

    Is This The Beginning Of A Downtrend In Home Builders?

    Falling lumber prices and weakness on the charts of home builders suggest that the next leg of the trend could be downward.
  10. Chart Advisor

    Low P/E Stocks Ready for a Turnaround?

    These stocks appear to be of great value based on P/E and Forward P/E.
  1. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  2. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  3. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  4. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  5. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  6. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>

You May Also Like

Trading Center