Bulls might put the brakes on before buying Westinghouse Air Brake Technologies (WAB) here. After a strong Thursday thanks to earnings, the stock reversed course on Friday, erasing all of the previous day's gains and then some.
This reversal has created a very bearish pattern in the Parabolic Stop and Reverse indicator (PSAR). This bearish pattern isn't just a single turn, but one of three occurring together.
The short-term, intermediate-term and long-term PSAR indicators moved from bearish on Wednesday's close to bullish on Thursday's close back to bearish on Friday's close. This formation, which looks like an arrow putting lower, is one I call Death Valley.
It isn't just the PSAR, though. Volume has picked up over the last four days, with the lowest of the four days being the single green day.
Furthermore, we have a long-term MACD planted firmly in bearish territory along with a short-term Commodity Channel Index (CCI) very oversold here. The stock is setting up either for a quick, but violent push lower, or a continued trend creeping slowly but deeply lower.
On first glance, the weekly chart is not nearly as bearish, but upon closer review there are some major red flags. The price drop last week has put Wabtec under support.
The minimum measured move here is $88, with probably maximum extension to $82.50 if Wabtec cannot close back over $93 this week. The Relative Strength Index (RSI) has fallen below 50, while the Vortex Indicator has also crossed bearishly.
Both momentum and trend are confirming the bearish price action. Toss in the eight-week simple moving average crossing under the 21-week simple moving average, and there are just too many reasons to be looking at this one on the long side versus other opportunities currently out there.