United Technologies' Rally Could Stall Out

 | Mar 14, 2017 | 10:52 AM EDT
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United Technologies  (UTX) has improved over the past 12 months and from its 2016 nadir, but the rally looks to be slowing and could stall for a number of weeks or months.

In this daily bar chart of UTX, below, we can see that prices have indeed moved from the lower left of the chart to the upper right. Prices are above both the rising 50-day moving average line and the rising 200-day moving average line. Yes, we are in an uptrend but we also need to look beneath the surface. 

The On-Balance-Volume (OBV) line made a high back in July and August; six months later the line has not yet broken that peak. Even though UTX has moved above the August high several times, the intensity of the buying, seen through the OBV line, has not matched the new price highs. This is not a "quick run out and sell signal" but it raises the issue or potential problem that volume is not confirming the advance.

In the lower panel is the 12-day momentum study, which shows a bearish divergence from November to February between higher price highs but lower momentum readings. Again this is a heads up that the pace of the advance has slowed.

In this three-year weekly chart of UTX, below, we can see the uptrend and the rising 40-week moving average line. There is a band of resistance from $115 to $125 from 2015 that we haven't forgotten about. Now look at the weekly OBV line in the middle panel below the price chart. Notice the downtrend since August? Somehow prices have risen but the selling has been more aggressive in weeks when UTX has closed lower.

In the lower panel the Moving Average Convergence Divergence (MACD) oscillator looks like it is crossing to a liquidate longs sell signal.

In this Point and Figure chart of UTX, below, we only look at price reversals. Currently, UTX is in a down column (Os) with support in the $102 to $98 area.

Bottom line: Despite slowing momentum and a bearish OBV line on a weekly basis, UTX has trended higher. UTX looks like it will stall or even weaken a bit, assuming my interpretation of the indicators is correct. Traders should consider raising sell-stop protection to lock in profits.

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