Chicago Bridge & Iron (CBI) might need some of its namesake, here, to keep from collapsing. This stock has a bearish setup going into the latter half of the week. The question is, can the bears take advantage?
Yesterday was a tough day for CBI, falling almost 5% on a fairly green day in the equity markets. The big Monday drop caused all kinds of havoc with the technical picture. Price fell out of a trading channel, which looked set to break higher. The Relative Strength Index (RSI) fell under 50, while the Commodity Channel Index flipped from +50 to -50. Furthermore, the long-term Moving Average Convergence Divergence saw a bearish crossover. Price is now trading under both the 10-day and 50-day Simple Moving Averages, to boot. The loss of momentum, trend and price support is troubling. Now, bulls are left with the support levels just above $49. But on a closing basis, CBI looks to have lost support. With the big kick up in volume, a retest of $45 to $46 is very possible, here. I believe we'd need to see another close below $49.38, preferably below $49.
The weekly view supports the $45 target: The overall picture is not as bearish, but it is still bearish.
Price action is trapped in a wide channel, here, but looks to be threatening the support (blue line). The downside target would be the channel support (black line) at $45. The longer-term RSI and Slow Stochastics are both setup to close the week in bearish territory. Again, it would be the same loss of momentum, trend and price support we see on the daily chart. There are still plenty of days left in the trading week, so all of these could change. The crossovers just happened on yesterday's drop, but I prefer to see how the week closes rather than what happens midweek.
While nothing has officially triggered, I am looking for a test of $45. I'm not ruling out a sub $40 look, but I don't feel it as a high probability yet. This market is telling traders to stay within themselves and look for the high probability plays. Any target under $45 is taking the lower probability play. That's not the game right now.