First Horizon National (FHN) has soared in recent weeks. One could easily declare that prices are extended -- and that would be correct, but nonetheless, you could miss out on still further gains in the weeks ahead if you focused solely on overbought/oversold indicators.
In this one-year daily chart of FHN, above, we can see two different and distinct rallies. The first rally starts in January/February and is a slow and steady advance through early November. In early November, the rally hits the accelerator and prices leap sharply higher. Yes, prices are extended and far above the rising, 50-day and 200-day moving averages, but that is not the entire story.
Notice the movement of the On-Balance-Volume (OBV) line, which moves from its January low -- confirming the rally. Now look closer at the OBV line from mid-October. Notice the strong turn upward? Buying turned aggressive before the election. Interesting. In the lower panel is the 12-day momentum study, and there is no bearish divergence between the price action and momentum. The absence of a bearish divergence doesn't mean that a stock won't correct, but it does tell us that buyers have not pushed prices to levels where their buying enthusiasm has slowed.
In this weekly chart of FHN, below, we can see the steep advance on a different time frame. Pretty dramatic looking. Even though prices compressed a relatively large gain into two weeks the chart is not flashing sell warning signals. Prices are above the rising 40-week moving average line. The weekly OBV line has moved higher with the price action including new highs in the past two months. The weekly Moving Average Convergence Divergence (MACD) oscillator is bullish and rising.
Bottom line: I would look for FHN to make a "high level" consolidation as it digests its gains. Maybe prices dip to $18 or $17.50 and this shallow correction or dip could be used for purchases. Our longer-term upside price target is $30.
