Action Alerts PLUS holding Stanley Black & Decker (SWK) has firmed up in the past month. Can it continue to build on these gains?
SWK just closed above the declining 50-day moving average (chart above). This positive development comes on the heels of a bearish death cross in early February as the 50-day average declined below the 200-day. The On-Balance-Volume (OBV) line has shown only slight improvement, which is not the picture we want to see as prices move up. The bullish divergence in January and February (lower lows in price but higher lows from the momentum study) is a positive.
This longer-term chart of SWK, above, does not help the bullish case. SWK is below a declining 40-week moving average after the double top formation at $110. The OBV line on this timeframe appears to have peaked with prices. The Moving Average Convergence Divergence (MACD) oscillator is bearish and below the zero line. The path forward for SWK is not clear. Prices could continue higher and test resistance in the $100 to $105 area or they could fail here and turn lower as buyers have not stepped up the pace of buying. The short-term trend is up, but traders would be wise to have a sell stop at $93 in case the rally fails.