Consumer giant Clorox (CLX) has had a strong rally the past 12 months, but that strength could be running out of steam. Let's go to the charts.
In this daily chart of CLX, above, we can see the uptrend and that prices are above the rising 200-day moving average line. All the touches or tests of the 200-day line over the past 12 months have been buying opportunities. We could see another test in the near future. While CLX is above the 200-day line, it is now below the 50-day moving average line, which is starting to curl over.
The daily On-Balance-Volume (OBV) line has been rising and confirming the rally until late June. The declining OBV line suggests we are seeing a shift from aggressive buying to aggressive selling. Now look at the momentum study during May and July. CLX makes higher highs from May to July, but the momentum readings show a pattern of lower highs, or a bearish divergence.
In this three-year weekly chart of CLX, above, we can see an uptrend, with prices above the rising 40-week moving average line. Notice how touches or tests of that rising moving average were opportunities to buy CLX or add to long positions. We could see another test soon.
The weekly OBV line has been going up since August 2014; impressive, but the line has turned lower recently. The OBV line has not yet broken its uptrend, but we are watching this closely. In the lower panel, the Moving Average Convergence Divergence (MACD) oscillator is generating a new sell signal from a lower high, as the moving averages that make up the indicator are crossing.
Strategy: CLX looks like it is bouncing to the upside this morning, but we want to pay attention to the risk. The risk is a close below the rising 200-day moving average line (daily) and a close below the 40-week moving average (a Friday close). With a weakening OBV line, it could mean that these averages don't become buying opportunities this time around.