Chemical company Dow Inc. ( DOW) was downgraded to hold by a sell-side fundamental analyst Monday. I see the charts, on the other hand, as strong and poised to go higher. Let me show you what I'm seeing.
In this daily bar chart of DOW, below, we can see some positive clues. Prices made a low in December and rallied when the broader market averages were weak. The shares are trading above the rising 50-day moving average line and above the positively sloped 200-day line. The price action in the past six or seven weeks looks like a small triangle or box formation that is expected to break out on the upside.
The trading volume has been more active since September. The daily On-Balance-Volume (OBV) line shows a decline into an early March low followed by a rise. A rising OBV line tells us that buyers are now being more aggressive than sellers. The Moving Average Convergence Divergence (MACD) oscillator has been above the zero line since late December and looks poised to turn higher.
In the weekly Japanese candlestick chart of DOW, below, a number of shadows in recent weeks -- both lower shadows and upper shadows. This development should not be considered unusual as sideways consolidation patterns can do that until they are ready to break out.
The weekly OBV line is very strong and bullish and much stronger looking than the daily OBV line. The MACD oscillator is in a bullish alignment.
In this daily Point and Figure chart of DOW, below, we can see a potential upside price target of $76.
In this weekly Point and Figure chart of DOW, below, we used a five-box reversal filter and here the software projects the $92 area as a price target.
Bottom-line strategy: Traders could go long DOW at current levels risking to $64. Add on strength. Our price targets are $76 and then $92.
