Core Laboratories (CLB) has been bottoming for more than two years and we are likely to see the base become bigger this year before an upside breakout materializes. Just remember that the bigger the base pattern the higher the subsequent rally when prices do break out on the upside. Let's check the latest charts and indicators.
In this 12-month daily bar chart of CLB, above, we can see that prices made little upside progress in the past year. Prices made a choppy rally the first half of 2016 and gave back those gains in the second half. CLB made a post-election rally in November and December but prices are correcting downward this month. CLB recently closed below the rising 50-day moving average line and the below the flat 200-day average line.
The On-Balance-Volume (OBV) line has been positive all year and what is really impressive is that the OBV line hardly declined when CLB decline from $135 to under $100. Comparing the price action in December and January when prices made higher highs and the momentum study, which shows lower highs, we are cautious about further near-term gains.
The base pattern or bottoming pattern we noted above can be seen more clearly in this four-year weekly chart of CLB, above. Prices are testing the flat 40-week moving average line. While the daily OBV line did not foreshadow any price weakness, this weekly OBV line shows more aggressive selling for the past year and a half. The weekly Moving Average Convergence Divergence (MACD) oscillator just edged above the zero line for an outright buy signal but the two averages that make up this indicator have begun to narrow towards a possible liquidate longs sell signal.
Bottom line: Unless CLB rallies to close above $127, a neutral to slightly negative stance is favored. The weekly chart suggests a decline back into the $110-$100 area would not be terrible and just widen the base pattern.