Enterprise Products Partners (EPD) has been in a downtrend since the middle of 2016 on our weekly chart (below). A bullish divergence between our momentum study and the price action since August is giving us a possible early clue about a reversal to the upside. EPD is not out of the woods yet, but we might want to put it on our shopping list going forward.
Let's review all our charts and indicators to see how we might want to get involved from the long side. A 6.8% yield is attractive if prices stop declining.
In this daily bar chart of EPD, above, we can see prices are below the declining 50-day moving average line as well as the 200-day average line, which began to weaken in the middle of September. The On-Balance-Volume (OBV) line only showed slight weakness from March to September, but in late September the OBV turned lower into late October. In recent days, the OBV line has turned flat.
In the bottom panel, we have the most interesting development since August. We have equal momentum lows in mid-August and late October vs. lower lows in price. This difference between price and momentum is a bullish divergence. A bullish divergence does not mean price is due to rally, but it does mean prices could rally.
In this weekly bar chart, above, we can see EPD is retesting its October 2016 low. Volume has been a bit heavier the past two months than it had been in the previous seven months. Prices are below the declining 40-week moving average line. A weekly close above $27 is needed to break above this long-term indicator. The weekly OBV line has been showing signs of a reversal to the upside the past three months. The weekly Moving Average Convergence Divergence (MACD) oscillator looks like it is narrowing toward a possible upside crossover.
In this Point and Figure chart of EPD, above, we can see prices have been in a downtrend for most of this year. A rally to $26.46 would be a small upside breakout while a decline to $23.25 would be a new low for the move down.
Bottom line: We do not have a strong sense that EPD is done declining, but we can suggest probing the long side on strength above $25.50, risking below $24. This seems to be a small amount to risk.
