Union Pacific Is Losing Price Momentum

 | Sep 14, 2018 | 12:55 PM EDT
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Union Pacific Corp. (UNP) was reviewed last month and I wrote that "UNP looks like it will travel higher with a target in the mid-$160's. Traders should risk below $144 and investors below $139." With prices not all that far away from our price target another look at the charts looks like a good idea this afternoon.

In this updated daily bar chart of UNP, below, we can see that prices have traveled higher the past month. UNP is above the rising 50-day moving average line as well as the bullish 200-day line. The daily On-Balance-Volume (OBV) line has been rising the past twelve months and recently made a new high for the move up as it confirms the price gains with signs of aggressive buying. In the lower panel we can see a bearish divergence as price momentum has made a lower high from August to September while prices made higher highs. This bearish divergence tells us that the pace of the rally has slowed and the risk of a correction has risen.

In this weekly bar chart of UNP, below, we can see that prices have doubled in the past two years or so. UNP is above the rising 40-week moving average line. The weekly OBV line has been rising the past couple of months but looks like it has lagged the price action. The 12-week price momentum indicator shows lower peaks from December to now. This is a slowing of the pace of gains over the past ten months - a potential serious bearish divergence.

In this Point and Figure chart of UNP, below, we can see a nearby price target of $162.

Insert chart 3 here

Bottom line strategy: UNP could edge higher to the Point and Figure target of $162 but price momentum divergences tell us to be more cautious. I would now risk to $146 for traders.

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