Johnson Controls International (JCI) has been in an uptrend all year, rising about 50% from its lows, but a downgrade by TheStreet.com's quantitative service yesterday, and a weakening momentum picture, suggest that traders and investors should raise their sell stops to protect profits on longs.
In this one-year daily bar chart of JCI, above, we can see an uptrend from a January low, with the rise starting on an upside gap. Prices are above the rising, 50-day and 200-day moving averages, but the 50-day has been tested several times since April. These tests have been buying opportunities, but in the last six weeks the short-term trend has shifted from up to sideways. The next test of the 50-day moving average may not be a buying opportunity.
The daily On-Balance-Volume (OBV) line has been rising this year, and tells us that buyers of JCI have been more aggressive. Two technical tools tell us to be cautious. First, if we took a ruler and drew an upward-sloping channel from the January nadir, we would find that prices so far this month are failing to reach the return line of the channel. This is a simple, visual sign of a shift in momentum. The second tool is the 12-day momentum study, in the lower panel. As prices made higher highs in May, July and September, the momentum study made lower highs -- for a bearish divergence. Wrap this weakening momentum picture with a quantitative downgrade, and short-term traders should raise their sell stops to a break of $45 to lock in the bulk of their gains.
This weekly chart of JCI, above, is giving us some additional caution flags. First, the price action this week looks like it could be a key reversal -- a new high for the move up but a weak close on Friday. In the lower panel, the trend-following Moving Average Convergence Divergence (MACD) oscillator is close to crossing to a liquidate-longs sell signal. Don't overstay your welcome.