The share price of Church & Dwight (CHD) has gone nowhere this year, but a recent deterioration in the technicals makes the chart look toppy now.
The price of CHD has largely been stuck in a $10 trading range the past 12 months -- from around $80 on the downside and around $90 on the upside (see the chart above). In the past few weeks, the pattern has weakened. The slope of the 50-day simple moving average is now negative, and the 50-day is about to cross below the 200-day moving average to generate a sell signal. The On-Balance-Volume (OBV) line turned lower in October, indicating that selling has increased on down days. Lastly, the Moving Average Convergence Divergence (MACD) oscillator is below the zero line.
A weakening picture also comes across from this chart, above. The 40-week moving average is curling over and the OBV line is neutral. In the lower panel we can see that the MACD oscillator is approaching the zero line from above.
Nov. 18, 2015 | 12:15 AM
Will Earnings Beat Help Lowe's Break Out of Trading Range?
- It will take two closes above $76, or below $65, to really alter the picture.
Despite a better than expected earnings report today, Lowe's (LOW) remains stuck in a sideways trading range. At this moment in time, our favorite indicators are not foreshadowing a breakout up or down.
This first chart of LOW, above, is giving us mixed signals. The On-Balance-Volume (OBV) line is neutral and not foreshadowing a breakout up or down. The 50-day and 200-day simple moving averages have a slight upward bias while the Moving Average Convergence Divergence (MACD) oscillator is pointing lower. It will take two closes above $76, or below $65, to really alter the picture.
This longer-term chart of LOW gives us some additional talking points. Again the OBV line is neutral. The MACD oscillator is in a bullish position on a weekly chart while the 40-week moving average is flat. Last, sideways consolidations in LOW can last a long time.
Nov. 18, 2015 | 11:20 AM
PayPal Attracts Deep Pockets
- A sell-stop at $32 would be a good idea.
Carl Icahn recently sold his stake in eBay (EBAY) and rolled the proceeds into PayPal (PYPL), according to media reports. Does the chart of PYPL look any different with this new information?
Looking at other names that Icahn has positioned, I would assume -- as we have no first-hand knowledge -- that his trading desk used the price weakness in August and September to buy the bulk of his new position. Notice in the chart, above, how volume increased in the latter part of August as prices broke below $34. This combination of falling prices and increased volume makes it easier to acquire a long position without attracting attention. Now, look at the next selloff at the end of September. The On-Balance-Volume (OBV) line does not make a new low with the price action and the momentum study makes a higher low in the bottom panel -- these divergences also suggest a scale-down buyer.
Prices and the OBV line turned up at the beginning of October. After some period of sideways price action we would look for PYPL to trade higher. A sell-stop at $32 would be a good idea.
Nov. 18, 2015 | 10:30 AM
EBay Bears Are at the Gate
- With a huge support zone in the $24 to $20 area, I wouldn't worry too much right now.
Carl Icahn is a shrewd, intelligent, sometimes visible, and big investor. Did I say big? It was recently reported that Mr. Icahn sold his 46.3 million shares of eBay (EBAY) (and took a 3.8% ownership stake in PayPal) in the third quarter.
In this short-term chart of EBAY, above, we can see the trading volume in the third quarter. Notice the big increase in volume in July. The four dollar rally to $29 from $25, with daily volume surging to between 20 million and 40 million shares a day, would have been a great time for Carl's trading desk to be aggressive and scale-up sellers of EBAY without attracting unwanted attention or depressing the price. Did I say shrewd?
This chart, above, also shows us how EBAY traded after Carl liquidated his position -- it rallied to a slight new high earlier this month and the On-Balance-Volume (OBV) line did not match the new high. This subtle volume divergence suggests underlying weakness as volume did not expand in the direction of the trend.
This longer-term picture of EBAY shows us two bearish divergences. In the lower panel, we have a momentum study showing the price momentum or rate of change of prices. The July rally had stronger momentum than the new high made this month. This divergence suggests that the bulls are getting "winded." Also notice the Moving Average Convergence Divergence (MACD) oscillator did not make a new high with price in November.
Outlook? EBAY may flounder a bit but with a huge support zone in the $24 to $20 area, I wouldn't worry too much right now.
Nov. 18, 2015 | XX:XX AM
Aramark's Earnings Beat Belies Future Chart Performance
- The stock has made numerous rallies into the $32 to $34 area that have all failed
Earnings reports are backward looking, giving one a snapshot of the last three months. Markets are forward looking, often looking out 6 to 9 months. Aramark (ARMK) appears to have reported a good quarter looking at the typical metrics, but the chart tells us a different story.
In this first chart of ARMK, above, we can see what chartists call a rounded top (the mirror image at a bottom is called a saucer bottom or rounded bottom). Over the past twelve months, ARMK has made numerous rallies into the $32 to $34 area which have all failed. In the past three months, the chart of ARMK has taken a turn to the downside with lower lows and lower highs. The 50-day simple moving average crossed below the 200-day moving average at the beginning of October for a death cross sell signal. The On-Balance-Volume (OBV) line is neutral while the Moving Average Convergence Divergence (MACD) oscillator shows a bearish configuration.
Because of Aramark's limited trading history, this chart, above, does not add all that much to the story, but it does show us where we should anticipate finding support -- around the $26 zone where ARMK traded in the second half of 2014. With the moving averages in a bearish configuration, I would anticipate ARMK working lower for a test of support.
