We have not reviewed the charts of Illinois Tool Works (ITW) since October 19, 2020 when we wrote that "Going long ITW right now would mean I would recommend a stop below $190 with a longer-term price target of $234. The risk/reward ratio of that trade is not compelling and the odds that we are looking at a possible reversal pattern is also not comforting."
Let's check out the charts again.
In this daily bar chart of ITW, below, we can see some big up and down swings the past 12 months. Prices had declined since early January and briefly broke the early October low. Prices are trading below the declining 50-day moving average line and below the declining 200-day line. The 50-day line crossed below the 200-day line earlier this month for a bearish dead or death cross.
The On-Balance-Volume (OBV) line shows a drift lower from the beginning of 2022 and a slight improvement from the middle of March.
The Moving Average Convergence Divergence (MACD) oscillator has turned upwards for a cover shorts buy signal but a new buy signal is not immediately at hand.
In this weekly Japanese candlestick chart of ITW, below, we can see that prices did correct lower after our October 2020 review. ITW eventually turned higher again with peaks in 2021 and again this year. Until recently the slope of the 40-week moving average line has remained positive. Now the slope of the 40-week line is negative and that can be a game changer.
The weekly OBV line has been pointed down the past three months. The MACD oscillator is in a bearish alignment below the zero line.
In this daily Point and Figure chart of ITW, below, we can see that prices reached a downside price target of $205.
In this weekly Point and Figure chart of ITW, below, we used a five box reversal filter. Here the software shows us that ITW reached a longer-term price target in the $245 area.
Bottom line strategy: The charts and indicators of ITW are not telling me a bullish story. Traders and investors should defer purchases.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.