DexCom (DXCM) has been trading sideways for much of the past year with dips below $60 being bought. Is this a base for a fresh advance by this medical devices company?
Let's take a closer look at the charts and indicators.
In this one-year daily chart of DXCM, above, we can see that a recent rally in DXCM has pushed prices back above the declining 50-day moving average line. The 200-day moving average line is flat and has been for several months. A rally above $75 will break the 200-day average line.
Since early November, two bullish divergences have appeared. First, prices made a lower low in early December versus early November while the On-Balance-Volume (OBV) line made a higher lower. In the bottom panel is the 12-day price momentum indicator, which has been making higher lows the past two months. A pattern of higher lows versus lower price lows is bullish divergence and tells us that the decline has slowed and could be poised for a move higher.
In this three-year weekly chart of DXCM, above, we can see how dips to and below $60 were bought going back to 2015. This buying is good, but it may not be enough in the short run to prompt a rally. Prices are below the flat to slightly declining 40-week moving average line. The weekly OBV line has been pointed down the past four months and signals increasing selling. The Moving Average Convergence Divergence (MACD) is in bearish territory, but soon could narrow toward a cover-shorts buy signal.
Bottom line: DXCM is likely to continue with further sideways price action. A close above $75 is likely to strengthen the chart and a close below $56 would turn the chart bearish. Until we get a clear view of the "next move," I would stand aside.