Realty Income Corp. (O) has been in a downtrend since the middle of 2016. Is there a bottom out there? With prices digging into long-term support I have less confidence that prices will make a lasting low here. Further weakness seems likely. Let's review the charts and indicators.
In this daily bar chart of O, below, we can see that O went from a downtrend in February-May to a sideways trend until early January. During the sideways period prices traded up and down through the 50-day and 200-day moving averages. In December the weakness started to appear as O failed at the underside of the declining 200-day average. A lower low was made in early January and a new "leg" lower began.
Trading volume has increased in the past two months and the daily On-Balance-Volume (OBV) line has turned down for a new low. A declining OBV line is a sign that sellers of the stock have been more aggressive. In the bottom panel of this chart is the 12-day momentum study (today's price minus the price 12 days ago). Momentum is making lower lows along with prices so we have no bullish divergences to signal a possible rally.
In this weekly bar chart of O, below, we can see the downtrend from the 2016 zenith. Prices are below the declining 40-week moving average line. There is some potential support in the $48-$44 area from May 2015 to September 2015 but it is old and investors may think differently now as circumstances (fundamentals) have changed.
The weekly OBV line has been in a downtrend the past 20 months, making new lows even when prices moved sideways. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been below the zero line for more than the past year and is still in a bearish configuration.
In this Point and Figure chart, below, we can see that prices have broken an uptrend going back to 2010. The break of $50 opens the way for a deeper decline with $39 as a potential downside price objective.
Bottom line: O has been in a downtrend for months and there is no reliable nearby support. A long-term uptrend has been broken and further declines are the likely path ahead.
