Shares of BorgWarner (BWA) have been nearly cut in half the past year, but the chart and the quantitative appraisal of the company are still bearish.
Start at the right hand side with this chart of BWA, above. BWA broke support at $40 and has been in a free fall this month. The moving averages are bearish with downward slopes. The On-Balance-Volume line has been pointed down the past year, telling us that bears are dominating the volume and selling. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line.
We had to look at a 10-year chart of BWA, above, to show the risk with this name. BWA has traded more than halfway through the $40 to $30 support zone from 2011 and 2012. One of the old trading "rules" I learned along the way in this business was that if a stock traded more than halfway through a support (or resistance) zone, it was likely to go all the way through. BWA is more than 50% through and a close below $30, should it happen, would open the way to a longer-term decline to $20 -- the next chart support area.