Pool Corp. (POOL) was discussed on Mad Money last night with our own Jim Cramer interviewing Manny Perez De La Mesa, the company's president and CEO. The company's shares that have more than tripled over the past five years. Sounds pretty bullish but let's see what the charts and indicators are saying today.
(For more on POOL, see: When Sellers Walk Away: Cramer's 'Mad Money' Recap.)
In this daily bar chart of POOL, below, we can see that prices have been in an uptrend from a late August low. Prices have tested the rising 50-day moving average line a number of times but none of the breaks started lasting declines.
The 200-day moving average line is bullish and intersects just below $140. The pattern of trading volume is uneven but there has been some slowing of the volume from late April. Higher prices need the support of expanding volume and when volume contracts "old time traders" get worried.
In the bottom panel is the 12-day price momentum study which shows lower peaks from May to July despite prices making higher highs. This difference is a bearish divergence and tells us that the pace of the rise is slowing. The reason the pace of a rise will slow is because investors are being more aggressive sellers as prices rise.
Another potential bearish divergence is seen in the On-Balance-Volume (OBV) line which has not made new highs along with the price action.
In this weekly bar chart of POOL, below, we see mixed signals. Prices are above the rising 40-week moving average line but the OBV line and the MACD oscillator are both showing a bearish divergence on this longer time frame.
In this Point and Figure chart of POOL, below, we can see a nearby price target of $164.80. A slight new high. A decline to $149.43 is probably needed to weaken the picture.
Bottom line: POOL is trading higher today but that does not alter nor reverse the bearish divergences I have noticed. Divergences can be warnings of a change and not necessarily outright sell (or buy) signals. That being said I would anticipate a period of sideways trading bounded by $160 and $140 for POOL in the weeks and months ahead.