Royal Bank of Scotland (RBS) made a low in early July and a successful retest in October and broke above the September highs, but more work needs to be done to attract bulls back to this stock.
In this one-year daily bar chart of RBS, above, we can see the rapid selloff that cut shares from $7.50 to $4 in short order. Volume surged as investors and traders rushed to the exits in late June and early July. Interestingly the On-Balance-Volume (OBV) line was improving in April and May suggesting some accumulation. These early buyers were caught off-sides as prices gaped lower. The 50-day moving average line has turned to the upside in December and the 200-day moving average line has begun to flatten. The OBV line since August has only moved up and down with the price action. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been in a positive configuration above the zero line since mid-November but the two moving averages that make up the indicator could cross again to a new liquidate-longs sell signal.
In this three-year weekly chart of RBS, above, we can see how shares declined in 2015 from $12 to just $4. Prices have stabilized around $4 and have been testing the still declining 40-week moving average line. The weekly OBV line has been uneven in its movement in the back half of this year. The weekly MACD oscillator has been improving this year but is still below the zero line.
Bottom line: RBS has several months of resistance in the $6-to-$7.50 area and we are likely to see more sideways price action before RBS can attempt a rally into this resistance zone. Further downside testing of the $5-to-$4.50 area could also be possible in 2017.