USA Today ran a story recently highlighting 10 S&P stocks with the biggest percentage gains since the last market high. This kind of story is backward looking. Hey, you would be ahead xx% if you bought these names a year ago. Thanks. Let's look at the charts and indicators of these top-10 picks and see what the future might bring. (Click here for Part 2 of this series on Amazon.)
Edwards Lifesciences (EW) gapped sharply higher last month and it is still "digesting" those gains. USA Today found EW to be a strong performer in the past year but past performance is no guarantee of future results (that was meant to be in fine print).
In this daily chart of EW, above, we can see that prices are pulling back to the rising 50-day moving average line. Or should we say that EW allowed the moving average to catch up? Of concern is the fact that the On-Balance-Volume (OBV) line has been flat for the past two months despite a sharp run up to new price highs. Prices can go up without an expansion of volume but it is not an advance that someone would have confidence in.
The Moving Average Convergence Divergence (MACD) oscillator has already signaled a liquidate longs sell signal but the oscillator is also back to the zero line for an outright sell signal.
In this weekly chart of EW, above, we can see that prices have more than tripled in the past three years. Very impressive. The 40-week moving average line would have kept you bullish all along if you traded in the direction of the slope. One thing that is confusing is the OBV line, which has not confirmed the advance by remaining flat for many months. Young students of technical analysis would find that a problem. Volume is not confirming the trend, so follow the trend or not? It looks like the MACD oscillator on this weekly time frame will be signaling a new liquidate longs sell signal.
A pullback to $90 or even to $80 would not be extreme considering the gains over the prior three years.