Normally anyone would be impressed with a $40 rally in a few weeks, but a weak longer-term picture for Martin Marietta Materials (MLM) suggests that we don't overstay this welcome.
While Barron's readers may have been moved this weekend by the bullish fundamental story looking for a rise of 35%, I remain bearish -- more impressed by the chart's top formation.
In this daily chart of MLM, above, we can see the rally to $150 from $110. The $150 level is also the underside of the declining 200-day moving average. The On-Balance-Volume (OBV) line has improved on this timeframe. Looking at the slow stochastic indicator in the bottom panel, we can see that it is up at levels considered to be overbought.
In this longer-term weekly chart of MLM, above, we get a different perspective, I believe. Here the rally looks like it is a rally back into a top formation. Prices have rallied to the underside of the declining 40-week moving average -- a good place for traders to at least take some profits. The uptick in the OBV line on this weekly timeframe is not that impressive. The stochastic indicator is overbought on this weekly chart, in addition to the daily scale readings. What to do? After a strong rally into resistance, I would recommend selling longs if you are long or perhaps buy puts as this latest advance does not look sustainable.