China-based Autohome Inc. (ATHM) kept bouncing off the rising 50-day moving average line until late last month when it broke below this technical indicator. Prices are bouncing up this morning but we could see a "reversal of roles" as this former support line becomes potential resistance.
Let's look at all our indicators and charts to see how this may play out.
In this daily bar chart of ATHM, below, we can see a sideways trading range for ATHM from August to December and then prices started a $60 advance. As noted above, the price of ATHM bounced off the rising 50-day moving average line several times telling us that traders and investors recognized and reacted to this average line. This is not unlike a hand-drawn trend line.
Prices broke below the 50-day line that worked so successfully for four months so it is not unusual to see prices respond in the opposite way and become sellers at the underside of the average line.
The On-Balance-Volume (OBV) line shows a rising trend for much of the past year but the OBV line weakens from the middle of June. A declining OBV line tells us that sellers of ATHM have become more aggressive.
The trend-following Moving Average Convergence Divergence (MACD) oscillator turned down in June to a take profits sell signal and is now moving below the zero line for an outright sell signal.
In this weekly bar chart of ATHM, below, we are seeing some bearish signals. Prices are still well above the rising 40-week moving average line, but the weekly OBV line has been inching lower and the MACD oscillator has crossed to a take profits sell signal on this longer time frame.
In this Point and Figure chart of ATHM, below, we can see a tentative downside price target or price objective of $71.95 - off the bottom of the chart.
Bottom line: I see enough technical weakness to avoid the long side of ATHM. If ATHM fails at the underside of the 50-day average line, experienced traders could probe the short side if they can risk up to $118. Look for a decline to the $70-$60 area.