Engine manufacturer Cummins (CMI) looks like it is slowing down. Prices have not made any fresh upside gains in the past two months, and with volume light and momentum slowing I would be cautious about adding new longs at this time. Let's look under the hood of the charts and indicators.
In this daily chart of CMI, above, we can see an uptrend punctuated by a number of corrections. More recently, we can see that prices have slipped below the rising 50-day moving average line, with prices at the lower end of a $148-$155 trading range. CMI is still above the longer-term rising 200-day moving average line.
Now, look at the volume pattern -- volume was strong from June to December and after December it has slowed dramatically. The easier-to-read On-Balance-Volume (OBV) line has been flat since December, suggesting that buyers and sellers are in balance on CMI.
In the lower panel, we can see a bearish divergence from January to March as momentum made lower highs and prices made higher highs. A bearish divergence is not an outright sell signal, but it is a signal that a stock could correct.
In this weekly chart of CMI, above, we can see that prices are above the rising 40-week moving average line. Prices are back to the highs of 2014. The weekly OBV line has been flat the past two months and the Moving Average Convergence Divergence (MACD) oscillator has crossed to a "take profits" sell signal.
In this Point and Figure chart, above, we can see the uptrend and the periodic corrections. The current consolidation shows support at $147.95, and a trade at $146.49 will be a new low entry for the move down on this chart.
Bottom line: CMI looks like it is stalling out, and a pullback to the $145-$140 area looks possible in the next few weeks. CMI has not made a major top formation, so I would view this pullback at normal; it could become a buying opportunity, depending on the price action and volume pattern in the days ahead.