Mohawk Industries (MHK) had a good rally this year but the bigger picture is that this advance only took prices back into a broad band of resistance and now prices could be rolling over.
In this daily chart of MHK, above, we can see a pretty strong rally but there is a shift under way. Prices are above the rising 50-day moving average line but that line is being tested. Prices are also above the 200-day average line but that line still has a negative slope.
The On-Balance-Volume (OBV) line moved up with the rally but has flattened out recently telling us that buyers are not as aggressive as before. Momentum has been weakening with lower readings in April than March. All of these clues add up to a growing risk of a pullback. Now look to the left hand side of the chart -- there is a broad band of resistance in the $190-$210 area.
In this weekly chart of MHK, above, we can see that the price is above the 40-week moving average line but the slope is still pointed down. Notice the dramatic moves on the OBV line. Prices have rallied back close to the prior high but the OBV line is making a much lower high. Prices came back but there was no intensity in the buying. In the lower panel, the momentum indicator is weakening.
A close below $188 is likely to spark a bigger decline in shares of MHK. Longs should think about protecting their profits.
