United Technologies (UTX) has been struggling on approach to $110. Prices were rejected in August and again last month. Will price finally breakout on the upside, or will we see yet another test of support in the weeks ahead? Bulls are probably going to like my answer.
In this twelve-month daily chart of UTX, below, you can see the rallies into the $108 to $110 area, which have been rejected and capped UTX since August. A resistance level is an area of supply and that is just half of the supply/demand equation. Since March, UTX has been making higher lows on the price chart. Look at the lows in March, and then June and October. Each low was slightly higher, giving us a subtle clue that demand was getting more aggressive. The slope of the 200-day moving average line is positive from May and tests of the line have been buying opportunities. Both the 50-day and the 200-day averages are pointed up at this time.
The movement of the On-Balance-Volume (OBV) line is positive from January through August, but neutral since then. The momentum study in the lower panel is showing a bullish divergence in September and October -- as prices make lower lows the study shows a high low. Now step back and look at the weekly chart.
In this three-year weekly chart of UTX, above, we have two out of three of our indicators with positive readings. Prices are above the rising, 40-week moving average line. The trend-following Moving Average Convergence Divergence (MACD) oscillator is above the zero line and recently crossed for a fresh buy signal. The weekly OBV line has been weak over the past three months and is not in gear with the direction of price.
Bottom line: UTX is more likely to break out on the upside. Risking below $104 and adding to longs above $110 is the way I would go. I am looking for gains towards $120 in the next few months.