In our last review of shares of RH (RH) back on May 12, we wrote that "You can buy some new furnishings from RH but defer your purchases of the stock as shares are only likely to go lower."
Let's check out the charts again as some bullish divergences are telling us to do some shopping.
In this daily bar chart of RH, below, we can see a more encouraging picture than last time we checked. Prices are still in a downtrend and trade below the negatively sloped 50-day and 200-day moving averages. The trading volume has been heavy since late March and could represent some shift of ownership from weaker hands to stronger hands.
The daily On-Balance-Volume (OBV) line made a low in late May and has diverged from the price action with gains while prices have made new lows in June.
The 12-day price momentum study has been making higher lows since January telling us that the pace of the decline has been slowing. This is another bullish divergence and can, at times, foreshadow a rally.
In this weekly Japanese candlestick chart of RH, below, we can see some lower shadows in May and June telling us that traders have been rejecting the lows. The weekly OBV line is holding above its May nadir. The 12-week price momentum study shows improving conditions since January.
In this daily Point and Figure chart of RH, below, we can see a potential upside price target in the $310 area.
Bottom line strategy: Aggressive traders could probe the long side of RH now risking to $220. On the upside we rally to $310 followed by the $380 area.
