Illinois Tool Works (ITW) was upgraded to a "Buy" today by one firm, but are the charts convincing? Let's check a few charts and indicators to see if it is time to buy quality industrials.
In this daily Japanese candlestick chart of ITW, below, we can see that while prices did not get cut in half, they were dramatically cut down in size. Prices rebounded from the March nadir but there is not a clear reversal pattern from the candles though someone might make a case for a morning star.
The moving averages - 50-day and 200-day - have negative slopes but we do not have a bearish death cross. The trading volume has been very heavy the past month but the daily On-Balance-Volume (OBV) line remains in a downtrend from late February.
The 12-day price momentum study or indicator in the bottom panel does not show a bullish divergence between the lower lows in momentum and the lower lows in price.
In this weekly candlestick chart of ITW, below, we can see how prices retested the lows of 2018. In this time frame we can see a possible bullish engulfing pattern to mark the low along with a lower shadow below $125-$120.
The 40-week moving average line has turned lower. The weekly OBV line shows weakness the past two months.
The weekly Moving Average Convergence Divergence (MACD) oscillator is in an outright sell mode below the zero line.
In this daily Point and Figure chart of ITW, below, we can see the price activity with less noise. ITW has reached a downside price target but at this juncture neither a still lower target nor a higher target is being projected.
Bottom line strategy: While the fundamentals of ITW may have improved I suspect that prices are more likely to trade sideways from here for several weeks. It is not time yet to get involved from the long side.
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