Computer Sciences Corp (CSC) has traveled a rocky road over the past few months. Uptrends have ended abruptly, with gaps to the downside. Prices have recovered from a February low, but this improvement looks inherently weak, and longs should be alert to the risk of fresh declines in the weeks ahead.
Looking at this daily chart of CSC, above, I don't know how anyone could have traded it successfully. The downside breaks almost appear out of nowhere. As prices made lower lows throughout December, January and February, the momentum indicator in the lower panel has made higher lows. This tells us that downside selling pressure slowed into the February low.
Prices have recovered, but the On-Balance-Volume (OBV) line has made only slight improvement, which means that buyers have not become that aggressive. Prices are above the rising, 50-day average, and recently pushed above the still declining, 200-day line.
This weekly chart of CSC, above, suggests that the rally in CSC should run into significant resistance and a fresh decline could develop in the weeks ahead. When you step back and look at the past three years of price action on CSC, you can see how the 40-week moving average line has rolled over. Prices have rallied back to the underside of the still-declining mathematical trend line. After several tests of the underside, prices have closed above it.
Now notice the months of overhead resistance in the $34 to $41 dollar area. Prices are back to the bottom end of this area, and the indicators don't suggest we have the power to break through it. The OBV line turned down in November and has been moving in fits and starts since. The MACD oscillator gave a cover-shorts buy signal, but is not flashing an outright, go-long buy signal.
Strategy: CSC could crawl higher, but with volume missing on this advance and resistance looming overhead, I would be on alert for another move lower.