Etsy, Inc. (ETSY) was last covered at the end of February and I wrote, "Traders long ETSY from October should continue to hold for higher prices. Our target is the low $30's. Sell stops should be raised to $20 to lock in some money if prices reversed."
Looking back over the past 10 weeks and in light of yesterday's earnings report, a fresh look at ETSY is in order this morning.
In this updated daily bar chart of ETSY, below, we can see that prices have reached our low $30's price objective and our sell stops at $20 were never in play. ETSY is still above the rising 50-day moving average line but weakening momentum suggests a retest of that line could develop in the weeks ahead.
ETSY is above the rising 200-day moving average line - maybe too far above it now. It is hard to read the volume pattern to discern if volume has been increasing on the rallies but the daily On-Balance-Volume (OBV) has a positive trend for most of the past 12 months but the line has become flat the past six weeks even as prices have moved higher. Higher prices and a flat OBV line is a bearish divergence.
In the lower panel of this first chart is another bearish divergence. The 12-day price momentum study or indicator shows lower highs from March to April to May, while prices have been making higher highs. The rally in the share price of ETSY has been slowing. Momentum typically peaks before prices peak.
In this weekly bar chart of ETSY, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has been strong since early April and is not diverging from the price action like the daily chart.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is above the zero line in a bullish mode but the two averages that comprise this indicator have begun to narrow. They may or may not cross to a take profits sell signal in the weeks ahead.
In this Point and Figure chart of ETSY, below, we can see the uptrend in price and a potential upside target of $35.62. A decline to $29.52 would begin to weaken this chart.
Bottom line: Traders and investors should have some nice profits since our buy recommendation on February 28th. Investors should raise sell stop protection to $27 and traders should have stops at $28.25. With momentum slowing and the OBV line on a daily basis stuck in neutral I am more concerned with protecting profits than trying to steal another base. If prices continue higher the $35 area is our price target.