No investment approach is perfect. Losses and mistakes will happen, but we can do better. In doing so, it doesn't hurt to combine investment techniques. "Technicals" with the "F" word -- fundamentals. Or technical analysis with quantitative analysis. MasTec (MTZ) was upgraded by TheStreet.com's Quant Service and this prompted us to look at the chart.
In this daily chart, above, of MTZ, we can see prices have been stuck in a sideways trading range during the past 12 months. Notice the chart resistance in the $20-$22 area. Prices have firmed up since February, crossing above the 50-day average line and then the 200-day line. The slope of the 50-day line is now positive. The On-Balance-Volume (OBV) line turned up from February, too.
However, the lower panel shows the momentum of the advance from the February lows has been slowing. With the advance of the OBV line, the decline is more likely to be shallow.
In this longer-term chart, above, we can see MTZ is above the 40-week moving average line, but the slope of the line has not turned positive. MTZ lost two-thirds of its peak at $45, so it is likely to take a longer period of time to make a turnaround. Prices are at the top end of a pretty long trading range. We can see several instances of MTZ stopping in the $20-$22 area. The OBV line is basically neutral on this time frame, despite the improvement on the daily chart. Last, we want to see a bullish divergence between price and momentum at a bottom. Price did make a new low in February, but we do not see a higher low from the momentum study.
Bottom line? Sideways price action is better than declining prices, and a quantitative upgrade helps, but we want to see a bigger base and more clarity from our technical indicators before committing to the long side of MTZ. Let's consider it a work in progress.