United Parcel Service (UPS) has made little upside progress in the past 12 months and the weakness in the past three months throws up some red flags for chart watchers.
Let's look more closely to see if UPS may need more packaging tape to support the stock price or whether a recovery may be on the next truck.
In this daily chart of UPS, above, going back 12 months, we can see a stairstep rally to a December high. The shorter 50-day moving average line generates several buy and sell signals while the slower 200-day moving average line successfully defines the uptrend with buying opportunities (tests) in May and early November. UPS gapped to the downside in late January and closed below the 200-day line. A February rally to the underside of the 200-day line failed. The On-Balance-Volume (OBV) line mirrors the price action in a positive way until January of this year. The OBV breaks down as volume surged with the late January gap. From early February, UPS has stabilized and traded sideways and our 12-day momentum indicator shows a bullish divergence with prices trying to hold the $106-$104 area. Let's step back and look at a weekly chart.
In this three-year weekly chart of UPS, above, we can see a mixed to bearish picture. UPS is trading below the 40-week moving average line but the slope of the moving average has not turned bearish. The weekly OBV line has edged down recently, which suggests increased selling pressure. The Moving Average Convergence Divergence (MACD) oscillator crossed to a liquidate-longs sell signal in January and could soon cross below the zero line for an outright sell signal.
In this Point and Figure chart, above, we can see an important upside breakout at $108. Prices continued higher to $118 before a reversal to the downside. Prices have retreated to test support around $104. A rally back above $110 would strengthen this Point and Figure chart as well as our daily bar chart.
Bottom line: UPS does not show a developed top formation, so I am downplaying some of the bearish technical signals and favoring a view that the decline has been a correction rather than the start of a downtrend. If UPS can continue to probe the $106-$104 area without breaking down and then subsequently rally above $110 (the January high), it should be the resumption of the uptrend.