IAC/InterActive (IAC) gapped to the upside this morning. This represents not only a new high for the move up but also gives us a breakout over the highs of 2014 and 2015. We have to look back to 2005 to find the last time IAC was this high. This price strength represents a little bit of a challenge for technical analysis.
How reliable is former resistance from 12 years ago? Is a breakout from an 11-year base pattern really as bullish as it seems? Let's dig down into the charts and indicators and see how creative we can be.
In this daily bar chart of IAC, above, we can see a slow and steady advance from May, and in April the rally seemed to accelerate. Volume became heavier. Prices moved away from the rising 50-day moving average line and the On-Balance-Volume (OBV) line surged to a new high for the move up. The Moving Average Convergence Divergence (MACD) oscillator was above the zero line from the beginning of April and accelerated from there. All of these strong technical signals came before today's upside gap and heavy volume.
In this weekly chart of IAC, above, we went back five years to show how IAC gapped above the 2015 and 2014 highs. IAC is above the rising 40-week moving average line. The weekly OBV line has been moving up since early 2016 and its recent new high confirms and supports the rally. The weekly MACD oscillator has been above the zero line since July 2016 and just turned up again for a fresh outright go-long signal.
This Point and Figure chart, above, shows the run-up today, but gaps don't happen on this kind of chart. The prices are filled in (X's) as if IAC did trade there. With the breakout at $84.84, the consolidation in 2014 through 2016 can be projected upward for a potential price target of $175. Obviously, that is a huge gain from here but the thing about Point and Figure charting is that it ignores time. The target is readable but we have no idea when we might get there, if we get there at all. We do know it won't be a straight line up and there will likely be other consolidation patterns along the way.
Bottom line: IAC might dip a little and fill a little bit of this impressive gap. The question is where do we feel comfortable buying IAC? And what do we risk? We will need a few days of trading to properly answer that question, but probably a sell stop below the low of this week will be a good stop-out point. Buying might be done toward $95 or on strength above $101.
