PPG Chart Pattern is Bearish

 | Feb 28, 2018 | 12:24 PM EST
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PPG Industries (PPG) was last reviewed on Real Money at the beginning of August, where I wrote, "Bottom line: It looks like PPG has made yet another top pattern and a break below $101 could open the way to declines in the low $90s." Looking back at the charts this morning we can see that PPG did not break below $101. Prices subsequently rallied to a January zenith and corrected lower in early February. The recovery rally in PPG stopped halfway into overhead chart resistance in the $116 to $122 area and prices have gapped lower this morning. Is this a pullback to buy or is the uptrend in trouble? Let's check and see if the charts are any help in reaching a decision.

In this daily bar chart of PPG, below, we can see that PPG has tested the 200-day line a number of times in the past twelve months -- in last March, In August and September and earlier this month. Prices opened sharply lower today and got close to the 200-day line before firming. We don't know where prices will close today but we can't rule out further price weakness and a test or a break of the 200-day line in the near-future. The slope of the 50-day moving average line has begun to turn negative. The On-Balance-Volume (OBV) line weakened significantly in July and since then it has been in a wide up and down range showing both accumulation and distribution. The Moving Average Convergence Divergence (MACD) oscillator made a high in late October and has performed weakly since even when prices made a new high in January.

In this weekly bar chart of PPG, below, we can view the price action in at least two ways. First we can consider the past three years to be a large sideways trading range or we can see a sideways range followed by an uptrend since late 2016. Prices are above the rising 40-week moving average line but it will not take much of a decline to break this mathematical trend. The weekly OBV line has been neutral for the past year and the MACD oscillator is in a bearish configuration as it turns lower.

In this Point and Figure chart of PPG, below, we can see that prices in between chart support and overhead resistance. Another reversal to the downside to $107.61 would be bearish while a rally to $118.86 would improve the picture a modest amount.

Bottom line -- PPG has made a number of rally failures since late October and while not all the indicators are bearish, the overall pattern of the price action tells me to be very cautious or to stand aside on any long position on this stock.

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