Red alert: SCHD ETF just flashed a rare risky pattern

The Schwab US Dividend Equity (SCHD) ETF has crashed in the past few weeks, and this trend may continue after it formed a risky chart pattern. It was trading at $25.10 on Wednesday, down by 13.25% from the highest point in December. 

SCHD ETF stock has formed a death cross

The Schwab US Dividend Equity ETF is at risk of a big meltdown after it flashed a death cross on the daily chart. This chart shows that the 50-day and 200-day moving averages have crossed each other for the first time since 2023. 

Historically, a death cross often leads to more downside since it signals that bears have prevailed. Worse, this death cross is happening after the chart formed an ascending channel between December last year and April.

The ETF has also moved to the 50% Fibonacci Retracement level. Also, oscillators like the Relative Strength Index (RSI) and the MACD have all pointed downwards. 

Therefore, there is a risk that the fund will continue falling this year, with the initial target being the year-to-date low of $24, which is about 5.8% below the current level. A drop below that level will point to further declines to the 78.6% retracement point at $22.78. 

The bearish outlook will become invalid if the SCHD ETF rises above the key resistance level at $28.

Why the Schwab US Dividend Equity ETF is crashing

The SCHD ETF is falling as Wall Street investors remain fearful. Data by CNN shows that the fear and greed index has crashed to the extreme fear zone. Historically, investors remain in the sidelines and even sell their shares when the fear and greed index is in the red zone. 

The current fear is driven by the ongoing trade war between the US and other countries, especially China. Trump announced sweeping tariffs on all imported goods to the US.

While he has eased some tariffs from other countries, he has pushed those from China sharply, risking a full-blown trade war and a recession.

Analysts warn that a recession may happen unless these tariffs don’t end. In a recent X post, Mark Zandi, a popular economist at Moody’s, noted that his recession odds jumped to 60% after the sharp decline in consumer confidence.

A recession would hurt the American economy and companies, impacting their demand and margins.

However, as we have written here and here, companies in the SCHD ETF will mostly be immune from these tariffs because of their industries. Most of the constituents are in the financial services industry, many of which are regional banks. 

The other top companies in the fund are in the pharmaceutical and consumer staples sectors. 

Further, there are signs that Trump wants to use his threat of tariffs as a negotiation tactic. He has already met with a delegation from Japan, and analysts expect that a deal with China will happen soon.

The post Red alert: SCHD ETF just flashed a rare risky pattern appeared first on Invezz