Brokerage and money management firm The Charles Schwab Corp. (SCHW) is trading higher Tuesday morning with an upside price gap after the firm reported stronger-than-expected quarterly numbers as results from financial firms continue to come in.
Do we pay up and go long here or hope for a pullback of sorts?
Let's review the charts and indicators.
In the daily bar chart of SCHW, below, I can see Tuesday's sharp gap higher and test of the underside of the declining 200-day moving average line. Prices have been trading above the rising 50-day moving average line for a while.
Trading volume has been restrained. The On-Balance-Volume (OBV) line shows some minor strength from a low in May. The Moving Average Convergence Divergence (MACD) oscillator is in a bullish alignment above the zero line.
In the weekly Japanese candlestick chart of SCHW, below, we have to imagine Tuesday's price action as this chart will not be updated until Friday's close. Prices have been moving higher ahead of the quarterly report.
Trading volume has been light. The weekly OBV line, however, shows improvement from April. The MACD oscillator has crossed to a cover shorts buy signal but remains below the zero line and short of an outright buy signal.
In this daily Point and Figure chart of SCHW, below, I can see a potential upside price target in the $74 area. Notice that Point and Figure charts do not have gaps -- the methodology is to put in Xs or Os as if the market traded there.
In this weekly Point and Figure chart of SCHW, below, I can see a $76 price target.
Bottom-line strategy: SCHW is likely to trade sideways or even perhaps a bit lower in the days ahead. I don't see enough trading volume so far Tuesday to give me confidence that today's rise will continue in the days ahead. A pause is not a bad thing as it gives traders time to assess their positions. Let's see how things play out a bit before a formal buy recommendation.
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