We last reviewed Illinois Tool Works Inc. (ITW) in October, and summarized the price action this way, "ITW is still pointed higher. Our upside price targets are $156 and $187." Prices continued higher into late January passing our $156 price target and then reversing short of our $187 objective. The price of this Action Alerts PLUS holding is down sharply since late January, so we need to see what is in the chart toolbox.
In this daily bar chart of ITW, below, we can see the sharp decline that began at the end of January. Many stocks were hit with profit-taking and selling in January and February but many have stabilized and have tried to move higher. ITW, however, broke its February lows in April and is now down to levels not seen since September. The stock is below the declining 50-day moving average line and the flattening 200-day line.
The daily On-Balance-Volume (OBV) line tells an interesting story. The OBV line shows a minor dip in late January and early February but it made new highs into March and April. Buyers of ITW acted more aggressively despite the falling prices. The OBV line starts to weaken in the back half of April and volume surges all of which suggests that some of the March and April buyers are now liquidating those purchases. Meanwhile, the trend-following Moving Average Convergence Divergence (MACD) oscillator fell below the zero line in early February for an outright sell signal and that has largely been the way to play ITW on the charts.
In this weekly bar chart of ITW, below, we can see the price weakness below the rising 40-week moving average line. This is the first break like this in more than two years. The weekly OBV line looks like it has weakened in the past two months and the MACD oscillator made a take profits sell signal back in January. The MACD is close to crossing the zero line for an outright sell signal.
In this Point and Figure chart of ITW, below, we can see a downside price target of $131. A significant rally is needed to improve the picture.
Bottom line: ITW is oversold and could bounce in the short-term from support around $140, but the bearish signals on the daily and weekly charts point to lower prices in the weeks ahead.