Edwards Lifesciences (EW) had a serious downside price gap in late October. Prices continued lower to an early December low and have since recovered not quite half of its late 2015 plunge.
Some of our indicators have improved and prices are almost ready to attempt to move into the gap (price void), but more consolidation may be needed to restore the former uptrend.
In this one-year daily bar chart of EW, above, we can see a strong rally for much of 2016, but then a significant selloff starting in October. In late October, EW gapped below the 50-day moving average line and the 200-day moving average line in one dramatic day. Volume was very heavy, as investors and traders sold aggressively.
The On-Balance-volume (OBV) went from an impressive uptrend to a tailspin lower. A belated bearish death cross of the 50-day and 200-day averages can be seen in early December. As prices continued to decline in November, two bullish divergences can be seen. Prices made lower lows in November, but the OBV line made equal lows and the 12-day momentum study made higher lows. These two bullish divergences may have contributed to the price improvement seen since early December.
In this three-year weekly chart of EW, above, we can see a long and impressive uptrend from early 2014 with prices rising four-fold. The 40-week moving average line did a great job in identifying and keeping one in a great rally. The slope of the 40-week average line is almost flat now, as prices approach the underside of the line.
The weekly OBV line had a positive slope until October 2016 and the October/November dip could be be "just a dip." The Moving Average Convergence Divergence (MACD) in the lower panel is narrowing towards a possible cover shorts buy signal or a buy signal coming from below the zero line.
Bottom line -- prices have recovered nicely, but they are not entirely "out of the woods." Prices could fail at the underside of the 200-day average or the 40-week average if there are longs above the market that are just waiting to get even. Some sort of near-term pullback would not be unexpected. A dip into the $95-$90 area on light volume might be good, and we could see if fresh buyers step in on the retracement.
