Newell Brands May Be Setting Up to Fall Further

 | Sep 07, 2017 | 10:25 AM EDT
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We have not looked at the charts of Newell Brands Inc. (NWL) for four months. In early May, we concluded that, "because NWL has some overhead chart resistance and there was not a lot of aggressive buying in the weeks and months before the gap, I tend to believe that prices are going to struggle and trade sideways to lower before NWL can muster the technical strength to break out to new highs." We now have the benefit of hindsight to see how that strategy worked out.

In this daily bar chart of NWL, below, we can see the upside price gap back in early May. Prices stalled in the next three months, and then turned lower as the end of July approached. In the past six weeks, the gap has been filled -- or the market has given back all the prior gains. Can NWL rebase in the mid-$40s or is it at risk for further declines?

A recent bounce in NWL failed at the underside of the flat 200-day moving average line -- not good. The 50-day moving average line is pointed down. The daily On-Balance-Volume (OBV) has been weak since mid-July and tells us that sellers of NWL have been more aggressive. In the lower panel is the 12-day momentum study, which is not yet showing a bullish divergence.

 
 
In this weekly bar chart of NWL, below, we can see that it has been in a large $44-$56 trading range since early 2016. In the past, the $46-$44 area found buyers, but this time might be different. Prices are below the flat 40-week moving average line. 
 
The weekly OBV line is pointed down and is close to making a new low for the move down. The weekly Moving Average Convergence Divergence (MACD) oscillator crossed to a take-profits sell signal in late July, and it is not far above the zero line for an outright sell signal.
 
 
Bottom line: Closes below $46 and $45 could precipitate a deeper decline for NWL. Tread carefully.

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