Sears Continues to Circle the Drain

 | Sep 14, 2018 | 9:45 AM EDT
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The stock of Sears Holdings Corp. (SHLD) has been in a downtrend for years. That is probably what every observer and the dwindling number of customers already know (read Jim Cramer's column on Sears here). Sorry, no spoiler alert here. Prices have bounced in the past, like in this past April and May, but the downtrend has always resumed.

The shares are bouncing Friday morning. Human nature seems to hope for a turnaround for this long-time retailer with the brands we grew up with -- we would hate to see this name go on a tombstone. Unfortunately, the downtrend is pretty dominant.

Let's look at some charts and indicators.

In the daily bar chart of SHLD, below, we can see the downtrend and the huge percentage decline in price. SHLD is below the declining 50-day average line and the longer-term 200-day average line.

The daily On-Balance-Volume (OBV) line showed some strength from March to May but drifted lower from May telling us that sellers have been more aggressive the past four months or so. There may be a short-term bounce driven by short-covering or bottom pickers but it is not likely to be long sustained.

The trend-following Moving Average Convergence Divergence (MACD) oscillator has been below the zero line for much of the past year telling us that the trend has been bearish.

In this weekly bar chart of SHLD, below, we should get one strong message: do not fight the trend. Prices are below the declining 40-week moving average line. The weekly OBV line is pointed down and the MACD oscillator is bearish.

In this Point and Figure chart of SHLD, below, we can see the downtrend using X's and O's - lots of O's. A downside price target of $0 (zero) is being indicated.

Bottom line strategy: As much as I love my set of Craftsman tools I must be objective about the prospects for SHLD. I find no technical reason to trade SHLD from the long side.

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