Chegg, Inc. (CHGG) is an education technology company that provides digital and physical textbook rentals, online tutoring, and other student services. Traders and investors have piled into the company's stock since March as the great at home learning adventure took off anew. Prices soared from below $30 to nearly $90 in a few months.The technical condition has weakened so let's check out some charts.
In this daily Japanese candlestick chart of CHGG, below, we can see that prices made a huge bearish engulfing pattern the other day and we have seen bearish confirmation yesterday and further follow-through today.
Prices are still above the rising 50-day moving average line but I would not be surprised to see a test of that indicator soon.
The On-Balance-Volume (OBV) line has turned lower telling us that sellers of CHGG have become more aggressive. The 12-day price momentum indicator shows lower momentum peaks from May to August which tells us that the price acceleration has slowed down and that is a bearish divergence when compared to the price action. A bearish divergence can foreshadow a price reversal.
In this weekly bar chart of CHGG, below, we can see a number of problems. Prices are extended above the rising 40-week moving average line.
The weekly OBV line shows a bearish divergence when compared to the price action - the OBV line has not made a new high while prices have made new highs.
The 12-week price momentum study shows that upside momentum is slowing.
In this daily Point and Figure chart of CHGG, below, we can see that the software is projecting a potential downside price target in the $59 area.
Bottom line strategy: Traders who are long CHGG should consider booking profits or reducing their long exposure.
