Boring might be beautiful if considering a new long-term position here after the recent market melt-up.
Given the S&P 500 has moved around 180 handles from the October low start to Friday's high, I can understand why many traders question buying anything new right now. I tend to agree. Here we are looking at quick trades and hedging weekly and monthly charts of a stock right here with the idea any purchases are based on a longer-term timeline.
Goodyear Tire & Rubber (GT) isn't a sexy name. Heck, some folks probably forgot the stock still even trades.
Over the past year, this stock quietly put together a very strong recovery after a disastrous fall of 2014. After a strong move, we've seen this rounding pattern of consolidation. It isn't quite a cup-and-handle pattern as we don't have a handle formation and the stop has challenged the top several times during this rounding pattern. Regardless, it is still a bullish consolidation targeting $37-$38 over the next 4 to 6 months.
The Relative Strength Index (RSI) has remained strong for 2014 indicating momentum favors the bulls. The trend here, as indicated by the Vortex Indicator, has just pushed bullish over the past few week along with the MACD. The stock has performed best when these conditions exist. Lastly, I've added the 40-week simple moving average, roughly equal to the 200-day moving average, on the chart (pink area). We absolutely want to see price above this area as the biggest drops occurred below the 40-week SMA.
The monthly chart appears to be the stronger of the two here. The stock is pushing higher in a very clear bullish channel. Recently, a bullish flag formed within this channel. This has been a repeating pattern. We can look back to see a similar flag in early 2013 and mid-2014, both leading to strong moves. Price in October has now broken out higher from the bullish flag. This push higher came right off the bullish channel support, which is a positive. The RSI looks to get back into overbought territory this month.
The stock performed best with the RSI over 70, another plus for buyers. The On Balance Volume (OBV) threatens the 13-month simple moving average here, but that's been consistent with past periods of price consolidation, so I'm not overly concerned. Lastly, the MACD is bullish here after a small retest and now another bullish crossover. Again, this is where the stock has performed best.
Overall, if GT were to close under $29 on either a weekly or monthly basis, I would be neutral. But we have several buy indicators here targeting $37-$38 on the upside over the next 4-6 months.