Cummins Inc. (CMI) was reviewed way back in May of last year and I wrote, "CMI might trade sideways in the $154 to $161 area for a while longer, but fresh highs are likely in the weeks ahead. Traders could go long on a close above $161... looking for gains to the $195 area." Last month CMI almost touched our $195 price target but what is a mere 82 cents among friends? From that January zenith prices have retreated down to the $165-$160 area to test the still rising 200-day moving average line and this looks like a good time to take a fresh look at the charts and indicators.
(Also, see Bob Lang's "Start Your Engines, Cummins' Dip Seems Done")
In this daily bar chart of CMI, below, we can see that CMI touched to the top of the rising 200-day line in August and November but this month prices have traded below the line. The 200-day line look like it is cresting while the 50-day average has turned flat.
The pace of trading increased as prices decline this month and the On-Balance-Volume (OBV) line turned down telling us that sellers became more aggressive. The Moving Average Convergence Divergence (MACD) oscillator moved below the zero line earlier this month for an outright sell signal but the moving averages that make up this indicator have begun to narrow. The MACD may or may not cross to the upside in the days ahead -- we will have to see.
In this weekly chart of CMI, below, we can see that prices have more than doubled over the past two years. Along the way from $80 to over $190 prices dipped towards the rising 40-week moving average line but the recent decline took prices below the line -- a difference.
The weekly OBV line shows a rise from early 2016 but the line may have reached a temporary high last month. We need more information to be sure. The weekly MACD oscillator crossed to a take profits sell signal and it is not all that far away from the zero line. Crossing the zero line would be an outright sell signal the way I use this indicator.
In this Point and Figure chart of CMI, below, we can see the rally of the past two years. The chart shows a possible downside price target in the $144 area. A decline to $157.05 would weaken the picture and a rally to $176.97 would strengthen this chart.
Bottom line: We do not have a lot of obvious sell signals on CMI but we have pointed out that the current decline is a little different from other declines. A close below the February and November lows around $160 is likely to precipitate further declines. Take appropriate action.