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  1. Home
  2. / Investing
  3. / Financial Services

Chubb's Weakening Momentum Demands Caution

Be cautious on new CB longs and tighten sell-stops on existing longs.
By BRUCE KAMICH
Jun 21, 2016 | 04:00 PM EDT
Stocks quotes in this article: CB, AIG

We recently wrote about Chubb (CB) in an update comparing Chubb and American International Group (AIG):

"The daily chart of CB, above, tells a different story, with prices above the rising 50-day and 200-day moving averages. The OBV line is neutral. Momentum is slowing, but there's no bearish divergence in place...or just go long CB with a $115 sell stop."  

Not much has changed since that update, but the On-Balance-Volume (OBV) line has continued lower and momentum has weakened. While I might continue to use a $115 sell-stop for investors I would use a $120 sell-stop for traders.

In this weekly chart of CB, above, we can see that prices are above the rising 40-week moving average line. The OBV line on this time frame has moved up a little from its January low. There is a bearish divergence, however, between the higher price highs seen in December and June and lower momentum readings. Despite the higher highs, the rate of price acceleration has slowed.

Bottom line -- with momentum diverging from the price action I have to be cautious on new CB longs and tighten sell-stops on existing longs. 

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TAGS: Investing | U.S. Equity | Financial Services

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