Shares of Timken Co. (TKR) broke out to the upside yesterday above the "neckline" of a 7- to 8-month base pattern, but volume really didn't surge and momentum has been weakening recently.
In this chart of TKR, above, we can see prices broke above the 50-day average line, and the slope of that average has turned up -- telling us the rally accelerated. Adding to this, prices recently broke out above the 200-day average. The On-Balance-Volume (OBV) line is moving up and confirming the uptrend. But we are bothered a little by volume and momentum.
The volume on Thursday's upside breakout should have been a lot stronger. Prices haven't been this high for months, and traders should have responded. The other issue is momentum -- or the rate of change of price. Prices have made new highs, but momentum is slower than the last leg up. This is a condition that we need to keep an eye on, as it can foreshadow a reversal.
In this longer-term view of TKR, above, we can see that we have rallied over the 40-week moving average. The OBV line is rising but it isn't "dynamic." The Moving Average Convergence Divergence (MACD) oscillator gave a cover-shorts buy signal and is moving up to eventually cross the zero line. This sounds ok, but resistance beginning at $37 (the lows of late 2014) could become a place where traders look to take profits in the near term.
Let's continue to monitor this one.