Lowe's Stock: More Work Needs to Be Done on the Charts

 | May 16, 2018 | 11:18 AM EDT
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Lowe's Companies (LOW) was reviewed at the end of February. At the time I wrote that, "It looks like LOW could give back much of its rally from the November low. Chart support should be found in the $85-$80 area." Glancing at the charts this morning I can see that LOW retreated into the $85-$80 support area and bounced in recent sessions. Can we expect some further upside gains? Let's review the chart and indicators again.

In this updated daily bar chart of LOW, below, we can see that prices are above the declining 50-day moving average line and the still rising 200-day average line. It is possible that the 50-day line may briefly go below the 200-day line for a late dead cross, however, if LOW rallies in the near term this dead cross is likely to be reversed. The daily On-Balance-Volume (OBV) line shows weakness to the end of April and some minor strength since that low. In the bottom panel is the 12-day price momentum study which shows higher lows from March to April even as prices made lower lows. This difference between the price action and the indicator is a bullish divergence and can foreshadow higher prices ahead.

In this weekly bar chart of LOW, below, we can see that LOW is trying to make a weekly close above the rising 40-week moving average line. The weekly OBV line looks more positive than the daily line and suggests that buyers have been more aggressive in purchasing LOW since August. The weekly Moving Average Convergence Divergence (MACD) oscillator is narrowing and could generate a new go long signal in the next few weeks.

In this Point and Figure chart of LOW, below, we can see the price improvement this month (look for the "5" on the chart). An upside price target of $98.88 is being projected. A breakout over $89.07 will strengthen the picture.

Bottom line: The price of LOW has turned up the past two weeks but with the 50-day average line still pointed down more work and basing needs to be done. Aggressive traders could put LOW on their shopping list but wait for a close above $90 before committing.

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