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Let's check out the charts of NOW. We last reviewed the charts back on August 19 and recommended that "Longs should consider raising sell stop protection to a close below $390 from a close below $380. $488 and then the round number of $500 are our next price targets." With our $500 price target exceeded a fresh strategy is needed.
In this updated daily bar chart of NOW, below, we can see prices tested the rising 50-day moving average line in September and again in November. Both of these shallow corrections turned out to be buying opportunities.
The slopes of both the 50-day moving average line and the 200-day moving average line are positive. What is not positive is the On-Balance-Volume (OBV) line which has only moved sideways since August. This is a bearish divergence as old chart readers like to see volume increase in the direction of the trend.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is barely above the zero line and does not depict a strong trend.
In this weekly bar chart of NOW, below, we can see some warning flags. Prices are still in an uptrend above the rising 40-week moving average line but similar to the daily OBV line. The weekly OBV line has been stalled the past two months while prices have climbed still higher.
The 12-week price momentum study in the lower panel shows weaker momentum readings since June even though prices made higher highs. This is a classic bearish divergence where prices do one thing (go up) while the indicator does something else (go down). This is a heads up that something has been changing beneath the surface.
In this daily Point and Figure chart of NOW, below, we can see a potential upside price target being projected to the $626 area. A trade at $544.78 is needed to refresh the uptrend. Weakness below $513.21 could precipitate further declines.
Bottom line strategy: Traders who are still long from our prior recommendations should do two things now. First, raise stop protection to $485 from a close below $390. Second, because of the bearish divergence from the OBV line and from the momentum study, I would book some profits here. The pace of the rally has slowed and volume is not expanding. These are signs that a sideways or lower correction could unfold.