In early September we looked at Signet Jewelers (SIG) and we wrote that "For the near-term we are going to see a disconnect between bullish fundamentals and charts that are correcting. Eventually the charts are going to get back in sync with the company news and that is when we want to look to be a buyer."
More bearish divergences have surfaced so I want to tell traders to be more cautious.
In this updated daily bar chart of SIG, below, we can see a number of bearish divergences. Prices have been in an uptrend but our favorite indicators have been going in other directions. SIG is still above the rising 50-day and 200-day moving averages, for now. The trading volume has not expanded as prices pushed higher in September and I consider that to be a bearish divergence.
The OBV line has been flat since late August as prices pushed upwards - another bearish divergence. The 12-day price momentum study weakened from September into October despite prices going up. The pace of the rally slowed. Our last divergence.
In this weekly Japanese candlestick chart of SIG, below, we can see upper shadows above $85 telling us that traders are rejecting the highs. The 40-week moving average line is still pointed up as is the OBV line but the 12-week price momentum study has been declining for several weeks.
In this daily Point and Figure chart of SIG, below, we can see a bearish price target of $68.
Bottom line strategy: The risks of staying long SIG have grown and I would advise traders to avoid the long side of SIG.
