With the threat of a trade war with China and other countries I thought it would be interesting to look at some Chinese companies from a technical perspective. TAL Education Group (TAL) may not be a household name in the U.S. but it is known for delivering after-school tutoring and English classes -- very much in demand in the mainland I understand.
Today's assignment is to look at the charts and technical indicators.
In this daily bar chart of TAL, below, we can see an uptrend in place from last July but a shift can be seen in May/June. Prices push up to a new high in June and then react downward.
The 50-day moving average line is broken and the slope of the line turns flat. TAL is now closer to the cresting 200-day moving average line.
The level of volume spikes up past 40-million shares and the daily On-Balance-Volume (OBV) line breaks its uptrend and drops sharply. A declining OBV line is a sign of aggressive selling.
In the lower panel you can see a May/June bearish divergence as momentum makes a lower high when prices made a higher high.
In this weekly bar chart of TAL, below, we can see an impressive rise the past three years from $5 to over $45. Prices have stayed above the rising 40-week moving average line the entire time but a test or even a break of the line is more likely now.
The weekly OBV line has weakened the past month and there is a significant bearish divergence from September to February and June as the 12-week price momentum study made lower highs and prices made higher highs.
In this Point and Figure chart of TAL, below, we can see a potential downside price target of $29. A decline to $29 would break the 40-week moving average line.
Bottom line: TAL may not be hurt in the U.S./China spat but its stock chart is likely to suffer in the weeks ahead. With the risk of a decline to $29 or even lower I would not have a long position in this security.