Why I'm Skeptical of Urban Outfitters' Uptrend

 | Apr 18, 2018 | 2:44 PM EDT
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We reviewed Urban Outfitters, Inc. (URBN)  only a month ago, with yours truly suggesting that traders should, "Reduce your long exposure." Prices moved sideways into early April but have slowly made new highs in the past two weeks. Was taking some profits premature? Or have the indicators strengthened. Let's check further. URBN was also mentioned last night in Jim Cramer's Mad Money recap.

In this daily bar chart of URBN, below, we can see that prices are now above the rising 50-day moving average line. Back in early to mid-March URBN was testing that line. Even with the move up to new highs the pace of volume has not increased. Chartists like to see volume expand with the trend and it has not done so for URBN. The daily On-Balance-Volume (OBV) line sometimes shows us trends that the volume histogram does not show but here too the action is not revealing a positive trend. The Moving Average Convergence Divergence (MACD) oscillator has turned up this month to a fresh outright go long signal.

In this weekly bar chart of URBN, below, we can see that the recent price bars have relatively narrow high/low ranges. A narrow range for trading in an uptrend can mean that sellers and buyers are much more in balance than when you see a large range for trading. Prices are above the rising 40-week moving average line. The weekly OBV line, unlike the daily line, looks like it has made a new high for the move up and the MACD oscillator is neutral now with the two moving averages on top of each other.

In this Point and Figure chart of URBN, below, we can see a fresh upside breakout at $38.61 and an upside price target of $44.82.

Bottom line: URBN has crept higher but without the benefit of increased buying interest, i.e. volume. I may be old school in wanting to see volume confirm the price action but it makes me suspicious of this uptrend. If you are still long URBN or considering going long I would recommend a sell stop below $35.

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