A three-month bearish divergence between the momentum indicator and the price action could be foreshadowing a correction for Take-Two Interactive (TTWO) in the near term.
Let's take a fresh look at the charts and indicators for TTWO.
In this daily bar chart of TTWO, above, we can see the bulls have been in control and rewarded with strong gains the past 12 months. Prices are above the rising 50-day moving average line during that time. The slower-to-react 200-day average line has been positive the past year. The On-Balance-Volume (OBV) line has moved higher, but with two "interruptions" -- one in March and April and one in June and July. The OBV line signals accumulation and aggressive buying, but the volume histogram right below the price action does not show a pattern of increasing volume.
The 12-day momentum study in the lower panel shows lower momentum peaks since early August, telling us that as prices have made higher highs, the pace of the uptrend has slowed. This is a bearish divergence and this tells us TTWO could be running out of steam.
Unlike other indicators in our "tool bag," divergences only tell us something different is going on, and that is not the same as many other technical signals with clear buy and sell parameters.
In this weekly bar chart of TTWO, above, we can see prices are well above the rising 40-week moving average line. The weekly OBV line has made new highs the past three months, but it looks weak compared to the impressive price gains. The weekly Moving Average Convergence Divergence (MACD) oscillator has been in a bullish mode or configuration since the middle of 2015 and is still pointed up. A slight narrowing of the two moving average could be the beginning of a take-profits sell signal.
Bottom line: Bull moves are sometimes hard to reverse, but a three-month bearish divergence between price and momentum tells me to be more cautious. Raise sell stop protection to a close below $95.