F5 Networks (FFIV) has rallied back this year to the underside of a large area of potential resistance. Will it continue to grind higher or are we more likely to see a pullback and more base building first?
In this daily chart of FFIV, above, we can see the big decline from the July/August peak to the February 2016 low. Prices have done a U-turn and are back above the rising 50-day simple moving average line. FFIV has continued higher with strength above the 200-day line, but its slope is still negative. The On-Balance-Volume (OBV) line has moved up nicely, signaling more aggressive buying and accumulation. The recent price action gives us pause. There is a bearish divergence in April and May with the higher highs in price, but lower highs from the 12-day momentum study. Weakening momentum could translate into a correction to the downside. With a broad band of resistance overhead in the $110-$135 area, further near-term gains may be hard to achieve.
In this weekly chart of FFIV, above, we can see how prices rolled over from the second half of 2014 until the second half of 2015. The OBV line on this time frame gave us no warning about the decline and only made a small dip before moving up again from January. Prices are above the 40-week moving average line but momentum is slowing. With a bearish divergence on the daily chart and slowing momentum on this weekly chart, I want to be patient. Let's see if we can pull back to $100 again and then we'll take another look.