Penske Automotive Group (PAG) is still in a downtrend, and after an oversold bounce could head lower in the months ahead.
PAG topped out in the $48 to $54 area for months (see the chart above). Prices turned down in August, followed by a death cross from the 50-day and 200-day moving averages in October. The On-Balance-Volume (OBV) line turned down with prices this month, telling us that there was strong liquidation. There has been a recent bullish divergence between the lower lows in price and higher lows from the momentum indicator, but this may only generate a bounce towards $46 before renewed selling develops.
In this longer-term chart, above, we can see that the $40 level is key. It was key in 2013, 2014 and could be key again in 2016. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish configuration and below the zero line. A weekly close below $40 is likely to mean a deeper decline to the next support level or support zone in the $35 to $30 area for PAG.
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The home décor retailer's charts indicate gains in its shares could be ahead.
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