Content is king, but it isn't always bullish. Case in point: Viacom (VIAB).
Last week, this one looked poised for a solid breakout. After several months in a consolidation channel, the stock started the week strong. Not only did we get a close over resistance, but then a follow-through day that brought traders piling in. Another push higher to $73.52 and it looked like we were off to the races ... until we weren't. A nasty intraday reversal last week left us with a rather large false breakout on the daily chart. Now, Viacom bulls are struggling with momentum, trend, price and volume. It's hard enough when one or two are working against you, but incredibly tough when all four fall out of bullish favor.
Price isn't terrible here. Viacom is simply back in the $67 to $71 price channel, but trading near the upper portion of the channel. When we trade near, but not through, the upper portion of a channel, there is no reason to buy. One has to assume the upside here is $1 vs. downside of $3. That's a risk-reward on the long side for someone else.
Furthermore, we've seen a sharp reversal in the commodity channel index as well as the RSI here. Both the RSI and MFI are clinging to the midline, but this is more representative of the channel price trend than a bullish outlook. The volume during the reversal last week is a big factor here. We haven't seen a day like that since very early this year. That size volume on a reversal will likely act as strong resistance even if price gets over $71. While it's hard to get longer-term bearish unless we get a close under $67, the risk-reward still favors the bears in the short term based on the current action. There's a little bit for the bulls here, but more for the bears.
The weekly chart looks like it will resolve either bullish or bearish here in May, likely in the first half of the month. Admittedly, Viacom is poised for a potentially strong reversal trade here. The RSI is banging on the midline while price is trying to break above resistance. If we see a close back over $71.75 for the week, then I'd say the bulls have a solid opportunity here to run Viacom back up to the $77.50 area.
However, there is something about the embedded price pattern within the bearish channel that raises the risk to the point where $63 has a higher probability than $77.50 here. Within this bearish channel sits a diamond pattern. Again, I'll admit this isn't the most symmetrical pattern, but if we always waited for perfect symmetry, we may never make a trade. Diamond patterns are notoriously bearish, so any break under $67.50 puts Viacom in a very high-risk, low-reward position on the bullish front.
Overall, this one is more in a holding pattern, but the current risks associated with the price action just aren't appealing. A simple wait-and-see approach over the next few weeks should clear the sky for Viacom. This one has the potential to return to a bullish setup, but, for the moment, the risks are simply too great. As easily as it could become bullish, it could more easily become bearish. Wait or play elsewhere is my view on this one.
