We commented on LendingTree (TREE) in a June 9 Real Money story about the most heavily shorted stocks. "LendingTree had a peak in August around $140 and it fell to near $50 by February. From the February low TREE doubled in two months and then corrected to $70. The OBV line has moved up and down with the price action. TREE could see a $110 to $70 trading range in the weeks ahead."
With nearly two more weeks of trading under our belt we thought another visit to the charts would be worthwhile.
In this daily chart of TREE, above, we can see a dip to $70 -- this is a higher low than seen in May. The 50-day moving average line is not far above the market. The On-Balance-Volume (OBV) line dipped with prices, but did not make a new low for the move down. This may be premature, but since the OBV line did not make a new low it could suggest that selling pressure was drying up. The momentum indicator only made a shallow move below the zero line, perhaps also telling us that selling pressure was less than on other moves lower.
In this weekly chart of TREE, above, we can see that prices are below the 40-week moving average line and the OBV line is pointed down, telling us that sellers have been more aggressive. Similar to the daily chart, we see that momentum made only a shallow dip. TREE may be forming an equilateral triangle pattern. From my experience, an equilateral triangle can be a continuation pattern -- that is prices continue in the direction before the pattern formed. Or an equilateral triangle can be a reversal pattern, going up in this case. On the daily and the weekly chart, we see three points on the downside in February, May, and now. We see two points on the upside in April and June -- there is less resistance (or tests) on the upside and that could be the course of least resistance.
A rally above $85 on TREE might just be enough strength to tip the balance to the upside. We're watching closely.