Philips: Diagnostics Are Positive

 | Jul 24, 2017 | 1:48 PM EDT
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ADRs of Koninklijke Philips N.V. (PHG) gaped to the upside Monday. The technical studies and price action were positive ahead of today's gap. The bigger issue or question is whether this near-term price strength can carry further and give us a sustained breakout above the early 2014 peak.

Let's drill down in the charts and indicators to see what they might yield and whether the risk/reward profile warrants a long recommendation.

In this daily bar chart of PHG, below, we can see that prices are above the rising to flat 50-day moving average line. The 200-day moving average line is bullish. The daily On-Balance-Volume (OBV) line shows a rising pattern but the line has not shown a sustained new high for nearly three months and this needs to be resolved either with a new high or this divergence will become a source of worry. The Moving Average Convergence Divergence (MACD) oscillator is turning up to a fresh go long signal above the zero line.

In this weekly bar chart of PHG, below, we can see that prices are above the rising 40-week moving average line. The middle panel with the weekly OBV line is a problem as it shows both that the line made a lower high when prices made higher highs but also that the line has weakened since late April. The weekly MACD oscillator is poised to cross to a take profits sell signal.

In this Point and Figure chart of PHG, below, shows a two-year base pattern. There is a breakout over $34.00 and a bullish price objective of $42.50. A trade at $38.50 would be a fresh breakout.

Bottom line: Things look positive for PHG. A decline below $35 would turn the charts bearish and that is where I would risk for existing longs and for new longs. $42 is my upside price target.

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