Mohawk Industries, Inc. (MHK) , which I wrote about on Monday, plunged to the downside on Friday. Shares were down 20% to $119.54 as of 2 p.m. ET. Prices have fallen from $285 back in December. You may be thinking this is "overdone" or that prices are "oversold" or that the stock is now "cheap". Don't believe it. There could be more pain ahead. Let's check the charts and indicators.
In this daily bar chart of MHK, below, we can see that today's gap to the downside was not the first downside gap. Look at what happened in late July. MHK is below the declining 50-day moving average line as the bearish 200-day moving average line. The daily On-Balance-Volume (OBV) line shows a bearish trend from late January and that tells me that sellers of MHK have been more aggressive for many months. The gap down today should not be a surprise. The Moving Average Convergence Divergence (MACD) oscillator is way down in sell territory.
In this weekly bar chart, below, I went back ten-years to show where we may or may not find support. The farther back you look on a chart the less reliable support (or resistance) becomes. Traders and investors have had years to change their positions and to forget about a support zone. The weekly OBV line shows weakness this month. The weekly MACD is way down in sell territory.
In this long-term Point and Figure chart of MHK, below, we can see a bearish price target of $93 being projected. Ouch.
Bottom line strategy: MHK could have a bounce at any time but the trend is down and we are likely to see further weakness. The low $90's is the next price target from our Point and Figure chart.