United Technologies (UTX) seems to be looking for a sustained direction. Prices "popped" to the upside Tuesday but a lack of follow-through buying today has us questioning the move up. Are prices just resting after the recent $4 rally? Or was this just short-covering and weakness will return?
Let's look at the latest charts and see if we can be more decisive.
A number of things go through my head when I look at this daily chart, below, of UTX. The first thing I notice is a "neckline" across the $98 level. Notice how every time prices touch $98 they have rallied? This is support -- an area or zone where buying interest halts or reverses a decline.
The next thing I notice is the rally to $105 in April with the rising On-Balance-Volume (OBV) line. This might be a "left shoulder" of a top pattern. Then we have a rally to $110, a new high, in August and the OBV strengthens on the way up but declines after an early August peak.
Prices have tested the rising 200-day moving average line this month and are now above that line. Prices made lower lows in September and October but the momentum study makes a higher low for a bullish divergence. A declining 50-day average line and a flat OBV line this month are reasons not to anticipate a "right shoulder."
In this weekly chart of UTX, below, we get a little clarity. Prices are just a hair above the rising 40-week moving average line. The weekly OBV line has been in a downtrend the past two to three months and that tells us that sellers of UTX have been more aggressive. The weekly MACD oscillator is also bearish with a liquidate longs sell signal at the beginning of September.
What is a trader to do? We just talked to the Oracle of Delphi and we are going to hedge our answer. UTX could rally further to the $106 area where I would want to take another look. Or UTX could turn lower again and test or even break the $98 level. I just don't know.