The Schwab US Dividend Equity ETF (SCHD) has crashed hard recently, falling below the 50-day moving average and the crucial trendline. It has dropped from the year-to-date high of $29.45 to $27.87, its lowest swing since November 5.
Bad news for SCHD ETF
The daily chart shows that the Schwab US Dividend Equity ETF has suffered a harsh reversal in the past few weeks. It has remained in the red in the last 12 consecutive days, its longest streak in the red.
Notably, the fund has moved below the 50-day Exponential Moving Average (EMA), meaning that bears are becoming more powerful.
Also, the SCHD ETF has moved below the ascending trendline that connects the lowest swings since June this year. It failed to move below this trendline six times since that period. This trendline was part of the ascending channel pattern shown in black.
The Schwab US Dividend Equity is now attempting to cross the 100-day moving average at $27.7. A drop below that level will point to more downside for the highly popular fund.
The Relative Strength Index (RSI) and the MACD indicators have also been in a strong downward trend, with the former approaching the oversold level.
If this crash continues, the next point to watch will be the 23.6% retracement point at $27.51, followed by the 38.2% retracement point at $26.3.
Still, there is a likelihood that the SCHD rally is just taking a breather, meaning that it will stage a strong comeback soon. Historically, stocks and other assets often retreat after rising to a crucial level and then bounce back.
Why the Schwab US Dividend Equity ETF has slumped
The SCHD ETF has retreated as data show that the inflow trend in the fund has started to deteriorate. Its best month in terms of inflows was in October, when it added $1.8 billion in assets. This growth then dropped to $1.6 billion last month and $967 million this month.
SCHD’s retreat is also because of several key companies that have suffered a deep reversal in the past few weeks.
A good example of this is Lockheed Martin, the giant defense contractor whose stock has plunged by 20% from the year-to-date high. It has moved to $490, and is hovering at the lowest level since July 23.
Other companies in the military industrial complex like Raytheon, General Dynamics, and Boeing have also crashed in the past few months. This decline is mostly because the ongoing defense spending has already been priced in by market participants.
Ford is another top laggard in the SCHD ETF this year as its stock crashed by over 30%. It has dropped to $9.96, its lowest level since August even as Tesla stock has surged to a record high, making it more valuable than other vehicle brands combined. Still, Ford’s performance has been significantly weaker than that of General Motors, which is down by just 14.4% from the year-to-date high.
Texas Instruments has also contributed to the SCHD ETF retreat as its stock crashed by 14.15% from the year-to-date high. TXN’s business is going through a major slowdown as demand for its chips wanes.
UPS is another top laggard in the SCHD fund as the deliveries company also continued falling. Its stock is down by over 17% from the year-to-date high.
These companies have been offset by a sharp increase in other popular names in the fund like Blackrock, Cisco, Home Depot, and Bristol Myers Squibb. The next key catalysts for the SCHD fund will be the upcoming Federal Reserve decision on Wednesday and Donald Trump’s policies.
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