The price of GlaxoSmithKline ADRs (GSK) turned lower in mid-2014 but the shares have bottomed since the middle of 2015 and the upside looks promising after support has developed around the $38 level since September 2015.
In this one-year daily chart of GSK, below, we can see a quick turnaround from November. In November the pace of volume increases and the price action shows selloffs and bounces until an early December low.
The decline in GSK in October is one-way -- down without any bounces. The two bounces in November are a sign of buying. The buying could be short-covering, outright buying or both. The moving averages respond with a lag with prices crossing above the 50-day average in January and the slope turning positive in February. GSK closed above the 200-day average line last week.
The On-Balance-Volume (OBV) line made its low in early December and has risen since, which tells us that buyers have been more aggressive the past three months. The trend-following Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in January for an outright go long signal.
In the three-year weekly chart of GSK, below, we can see how GSK has traded sideways since the middle of 2015. If you look at the slope of the 40-week moving average line you can see how the trend changed in May of 2016 as the slope turned from down to sideways. Prices have traded above and below the 40-week average line since May and currently are back above the line. The weekly OBV line has been moving sideways the better part of two years. The weekly MACD oscillator crossed to the upside giving us a cover shorts buy signal.
In this Point and Figure chart of GSK, below, the price action over the past two years looks like a high-level consolidation following a strong rally from the 2009 low. The $44 level is a breakout from this consolidation pattern and would yield a potential upside price target of $57.
Bottom line: The long side of GSK can be approached either on weakness toward $40 or on strength above $43 and $44. Weakness below $39 would get me to move to the sidelines.