We Have Bad News and Bad News for Ethan Allan

 | Jan 30, 2017 | 9:21 AM EST
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The old line is we have good news and bad news, but with the charts and indicators on Ethan Allen Interiors (ETH) I can only find bad news. ETH has broken down hard this month, smashing the October/November lows. The breaking of this key support area puts the bears in control. Let's look closer.

In this one-year daily bar chart of ETH, above, we can see that January has been really hard on the shares of this retailer. ETH broke below the 50-day moving average line and the 200-day moving average in one dramatic day, with a gap to the downside. Prices recovered a bit, but gaped low last week on heavy volume.

The On-Balance-Volume (OBV) line only recently turned down, so it looks like buyers of ETH remained optimistic a little too long, as prices sank nearly $10 in a few weeks. The trend-following Moving Average Convergence Divergence (MACD) oscillator is deep in bearish territory, below the zero line.

In this three-year weekly chart of ETH, above, we can see how prices have broken down below the flattening 40-week moving average line. The action of the weekly OBV line is not encouraging. When prices made a new high in December, the OBV line did not move up to its own new high.

Now, the OBV line is pointed lower, telling us that sellers of ETH have become more aggressive. The weekly moving average convergence divergence (MACD) oscillator has also performed like the OBV line, in that it, too, made a lower high in December vs. the price action. The next chart support on this weekly chart is in the $26-$22 area.

This Point and Figure chart of ETH, above, suggests that $20 is a possible downside price target in the weeks and months ahead.

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