Generac Holdings (GNRC) has been hit with a number of negative news stories of late, such as its chief operating officer resigning and analyst downgrades this month, but now the company has to deal with the announcement of a cut in its full-year guidance. Generac stock is down sharply in pre-market action here on Wednesday as a result.
Let's check the chart action of Generac to see what it might tell us.
In this daily bar chart of GNRC, below, we can imagine that prices are trading around $126 or so in the pre-market. This would be a new 52-week low. GNRC is trading below the declining 50-day moving average line and below the 200-day line. Trading volume has been heavier than average in the past four weeks but the trend of the On-Balance-Volume (OBV) line has remained the same -- down. Sometimes heavier trading volume at a potential price low signals a shift of ownership from weak hands to strong hands. The 12-day price momentum indicator shows a bullish divergence with the price action, but this indicator is not going to signal a rally.
In this weekly Japanese candlestick chart of GNRC, below, we can see a spinning top pattern on the most recent candle. Wednesday's new low will not give us the start of a bottom reversal, unfortunately. The 40-week moving average line is bearish. The weekly OBV line is bearish. Prices are very oversold according to the slow stochastic indicator but it looks like they will get more oversold.
In this daily Point and Figure chart of GNRC, below, we can see a potential downside price target in the $89 area.
In this weekly Point and Figure chart of GNRC, below, we can see that prices reached and exceeded a downside price target in the $161 area.
Bottom line strategy: A number of my neighbors down here near the Delaware coast have generators but my unscientific survey is not going to change Generac's guidance. Avoid the long side of GNRC for now.
