Shares of Weight Watchers International (WTW) had a huge upside move when Oprah entered the picture, but the bump looks like it has run its course.
If you were long WTW three or four months ago, at around $6, you made your year -- Sell now. Book the profits and figure out your bonus.
WTW rocketed higher in October, with a surging On-Balance-Volume (OBV) line. The OBV line has flattened out and the slow stochastic indicator is coming down from an overbought sell signal. Not convinced? Look at the momentum study -- and bearish divergence of the higher highs in price and the equal highs from the momentum study (M=V-vx).
This longer view of WTW shows us two things. One, the rise was rapid and steep, and our slow stochastic indicator is very overbought. Second, move your eyes along the $30 level and notice how it has been support in late 2013 and resistance in 2014. I suspect it will again act as resistance. Besides, who wants to be long Weight Watchers during Thanksgiving?
Nov. 25, 2015 | 10:50 AM
Is Kinder Morgan Ready for a Bottom Bounce?
- KMI will need some further base-building, but its chart indicates a potential rally.
Kinder Morgan (KMI) topped out back in late April and has nearly been cut in half over the subsequent seven months. Forward-looking traders may now want to probe the long side with an appropriate stop loss.
This chart of KMI, above, shows the long decline this year. There is a dead cross (the 50-day average going below the 200-day average) in early July and prices have remained below the 50-day and 200-day moving averages. The On-Balance-Volume (OBV) line just made a lower low along with the price action.
But -- there is always a "but" -- this time it is the momentum study in the lower panel. In November, KMI has made lower price lows, but the momentum study is also making higher lows. The higher lows mean that the rate of decline is slowing. Declines slow because prices have reached a level where they are now attractive to fundamental buyers.
This longer-term chart of KMI, above, also gives us a hint of a bottom. While the OBV line is still in a downtrend, it is holding above the 2014 lows. Second, on this time frame we can see a bigger bullish divergence between the lower lows in price and the equal lows on the momentum study. KMI will probably need some further base-building, but a close back above $25 should help the picture.
Nov. 25, 2015 | 10:15 AM
Energy Transfer Partners' Chart Foreshadows Rally
- A move above $43 should be a catalyst further gains.
Shares and shareholders of Energy Transfer Partners (ETP) have suffered a prolonged decline over the past 12 months. It now looks like the pain is over.
In this first chart of ETP, above, we can see the erosion in prices to the upper $30s, down from the upper $60s. There is a dead cross back in March when the 50-day moving average went below the 200-day moving average. Prices challenged the 50-day moving average a number of times, but prices continued to sink lower and every test of the moving average was an opportunity to sell. The volume of trading increased significantly at the end of September and the On-Balance-Volume (OBV) line has mostly been moving sideways (it recently made a new low).
In the bottom panel of this chart, above, we have our favorite leading indicator -- momentum. Prices have made equal lows in late September and recently. However, the momentum indicator has made a higher low, which is known as a bullish divergence. This "category" of divergence is when prices make an equal low but the indicator makes a higher low. The higher low tells us that something was different on the second decline, e.g. prices went down at a slower pace suggesting buying on a scale down. This kind of "action" can foreshadow a turn around to the upside.
This longer-term weekly candlestick chart of ETP, above, gives us some other "turnaround clues." First, while prices have broken below the lows of 2011 and 2012, they are back to old resistance from 2009, which should still act as support on the decline. Second, the volume is very heavy in recent months while prices have begun to stabilize. This suggests that buying has been as aggressive as the selling and old longs who are selling are being replaced by new longs who are buying. Last, the slow stochastic indicator is very oversold, meaning that prices have gone down too far/too fast. A market can get more oversold and stay oversold for a long time, but this too is a positive clue. A rally above $43 should get the ball rolling on the upside. Use a sell stop under the recent lows.
Nov. 25, 2015 | 8:00 AM
Ligand Pharmaceuticals Has the Right Medicine
- Buy LGND at current levels and add to longs on a close above $110.
Ligand Pharmaceuticals (LGND) is another pharmaceutical name that looks strong on the chart.
LGND has climbed for most of the year, with a strong rally (chart above) in the first half of the year. The On-Balance-Volume (OBV) line has been going up all year, telling us that accumulation has been strong. The 50-day and 200-day moving averages are in a bullish alignment. Traders could consider buying LGND at current levels and add to longs on a close above $110. A $95 sell stop below the market should help to cut down the risk.
This longer chart of LGND suggests that much higher prices could be seen with the positive and rising 40-week moving average. It features a very bullish OBV line and a bullish Moving Average Convergence Divergence oscillator.