International Flavors & Fragrances Is Looking IFF-y

 | May 10, 2017 | 1:04 PM EDT
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International Flavors & Fragrances  (IFF) gapped lower the other day on heavy volume. IFF closed below the rising 50-day moving average line and is testing the positive 200-day moving average line. Nearby support around $132 has been broken.

The January-May rally stopped short of the late September/early October highs as momentum slowed. The question at this juncture is whether the decline will continue and reverse much of the previous gains or whether support in the $127-$123 area will halt the decline.

In this daily bar chart of IFF, above, we can make two more observations about the price action and the indicators. Notice how the rise in the On-Balance-Volume (OBV) line hardly recoups the prior decline from October to January. Selling was a lot more aggressive than the subsequent buying. In the lower panel is the 12-day momentum study, which shows a bearish divergence compared to the price action. As prices made higher highs from March to late April/early May the pace of the rise slowed. This is a bearish divergence and can foreshadow weaker prices ahead.

In this weekly chart of IFF, above, we can see prices are testing the slightly rising 40-week moving average line. The weekly OBV line is neutral and the MACD oscillator is narrowing toward a take-profits sell signal.

Bottom line: IFF is pointed lower in the short run. A test of the $126 level/area looks likely in the days ahead. Prices might hold around $126 and try to bounce, but failure to attract support at $126 could bring further declines to the $120-$116 area.

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