We looked at Texas Instruments (TXN) at the end of November, where we said, "A new high close above $100 will refresh the uptrend and probably put us on a path to our $125 and $135 price targets." This month TXN sprinted $10 higher from $95 and we got our close above $100, but unfortunately a number of overbought readings and bearish divergences from our momentum studies are now saying "caution ahead." Let's check out the latest charts and indicators.
In this daily bar chart of TXN, below, we can see that our trend following indicators are still bullish. Prices are above the rising 50-day and the bullish 200-day moving averages. The On-Balance-Volume (OBV) line has moved up to a new high telling us that buyers of TXN have been aggressive. The stochastic indicator is an overbought/oversold indicator that has been around since the 1960's. It is made up of a fast line and a slow line and plots where in the range prices close. The closes tend to be clustered near the highs of the day at tops and near the lows of the day at market lows. This chart of TXN shows the slow stochastic indicator nearly pinned at the top of the graph -- very overbought. In the lower panel is the 12-day momentum study which shows a high equal to the late September high even though prices now are much higher. This is a bearish divergence and tells us that the bulls are losing some conviction.
In this weekly bar chart of TXN, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line is pointed up but seems to be lagging the price action. The weekly slow stochastic is likely to make a bearish divergence versus the price action. And, lastly price momentum peaked in early November.
In this Point and Figure chart of TXN, below, we can see the strongest volume and support is in the $82 to $77 area. Notice how light the volume has been above $100?
Bottom line -- yes the trend is up and the signals from the indicators I have presented are not obvious sell signals, but I think TXN could suffer a profit taking reaction or a reversal in early January. My best advice is to protect your long positions.