Carrizo Oil & Gas (CRZO) has made lower lows since December but since March the lower lows have been diverging with the momentum study. Prices have made lower lows but the 12-day momentum study has made higher lows. This divergence tells us that the pace of the decline has slowed and this situation can many times foreshadow a rally.
Momentum is not the only indicator we look at so let's dig deeper to see what else may help us catch a successful trade from the long side.
In this daily bar chart of CRZO, above, we can see that prices are below the declining 50-day moving average line and the declining 200-day moving average line. The daily On-Balance-Volume (OBV) line has been declining since early October but it looks like it is trying to flatten out the past three months.
In the bottom panel is the 12-day momentum study we noted earlier. Momentum is making higher lows from March to April to May while prices make lower lows. Divergence is not a precise timing tool so this bullish divergence says that CRZO is due for a rally but we have no strong indication that it will happen.
Looking at this weekly bar chart of CRZO, above, we are unfortunately not getting any additional bullish technical clues. Prices are below the declining 40-week moving average line. The weekly OBV line is pointed down and the Moving Average Convergence Divergence (MACD) oscillator is below the zero line.
Bottom line: It would be nice to see CRZO rally and break its five-month downtrend but we cannot make it happen. The daily chart and the momentum study suggest a turn is coming but this tool is so far disappointing us.