Sherwin-Williams (SHW) broke down from a topping pattern Friday and today's rebound looks like another chance to sell it as it retests a neckline from below.
In this 12-month daily bar chart of SHW, above, we can see how prices bounced off the $280 level a few times until this past Friday when they made a small gap to the downside and closed below the flat 200-day simple moving average line. Prices broke below the 50-day moving average line in mid-August. Prices made a new high for the move up in July and the On-Balance-Volume (OBV) line did not move up in tandem with prices and confirm the price strength.
The Moving Average Convergence Divergence (MACD) oscillator peaked in mid-July and moved to an outright sell signal in early August when the indicator fell below the zero line.
In this three-year weekly chart of SHW, above, we can see how prices just closed below the flat 40-week moving average line. The weekly OBV line did not make a new high with prices this summer and looks like it has rolled over, suggesting that volume has been increasing in weeks when SHW has closed lower. Increased selling when a stock is down is a sign of more aggressive selling and shows that investors and traders "want out."
The MACD oscillator has been in a bearish configuration for several months and could soon cross below the zero line for an outright sell signal.
Once this short-term bounce in SHW is over I would look for a renewed decline toward $250 at some point in the fourth quarter.