You have to admire H&R Block (HRB) . It seems to be in a shrinking industry, in my opinion, but every tax season it comes out swinging, with a new ad campaign. Every year there are probably more people in the U.S. that need to file taxes and certainly every year the forms seem to get more confusing, but like other industries we have seen that software (and free software) is allowing people to click their way to April 15th.
Software has also put downward pressure on the fees the industry can charge, I believe. But, enough about my two cents on the tax prep business. Let's look at the charts of HRB.
In this one-year daily bar chart of HRB, above, we can see that prices are struggling. HRB sold off sharply in early 2016 and it has been trying to stabilize and rally since May. Despite two upside attempts, the $24-$25 area has provided enough resistance to stall and weaken prices. HRB is now below the declining 50-day moving average line and the declining 200-day moving average line.
The movement of the On-Balance-Volume (OBV) line is interesting. The OBV line made a low in May along with prices and has risen to a December/January high even though prices have made a lower high than the levels reached in August. This OBV movement tells me that buyers of HRB have been more aggressive pretty much all of 2016, but it has not resulted in a sustained rally.
Investors who accumulated shares of HRB since May have been disappointed. If HRB continues to decline, these longs may turn out to be sellers. Momentum is not giving us any positive signals at this time.
In this weekly chart of HRB, above, we can see a topping process in 2014 and 2015, followed by a big decline into 2016. Prices are trading below the now flat 40-week moving average line and the $20 area looks like the only support on this chart. The weekly OBV line has weakened the past two months following a good rise from May. The Moving Average Convergence Divergence (MACD) oscillator improved from a May low but never reached the zero line, and is now signaling a new sell.
Bottom line -- in full disclosure, I will (again) be using an EA to handle my taxes. I lost patience with the process years ago. I also do not have much patience with the charts of HRB. HRB has been under pressure recently and a test of support around $20 looks like the path of least resistance. Maybe it holds and tries to rally again, but the whole pattern does not look positive until HRB closes above $25.