Dow Chemical (DOW) had a soft patch on the charts in July and August, but now it looks like it has regained its footing and new 52-week highs could be in the cards in the not too distant future.
In the first chart of DOW above, which is a key holding of Jim Cramer's Action Alerts PLUS charitable trust, we can see the summertime decline and breakdown below the 50-day moving average in July. DOW made a relatively quick recovery with a successful retest of the August low in late September and a subsequent rally with a significant pick up in volume. Prices quickly crossed back above the 50-day average and cleared the September highs. It then consolidated the gains as prices moved sideways in a tight range ahead of earnings.
The three-year weekly chart above puts the correction and rebound in a better perspective. The price action of the past two years looks like a $40 to $55 trading range. Notice the steadily rising On-Balance-Volume line and the crossing of the trend following Moving Average Convergence Divergence oscillator in the lower panel.
DOW should cross back above its 200-day moving average today, with a retest of the 52-week high around $54 looking like a strong possibility. Looking at a Point and Figure chart (not shown) for a price target gives us an initial objective in the $64 to $65 area.