Singh started off by saying that lumber prices have no bearing on the demand for Azek's wood alternatives. Their best-selling prices cost four times the price of lumber.
Singh added that they're still seeing a lot of tailwinds in the market, including the continued housing boom for new construction and a strong remodeling trend. There are over 60 million decks that are past their useful life in America, Singh said, and that makes Azek very bullish about its future.
We first looked at the charts of AZEK way back on Dec. 4, 2020 and recommended "We do not have a lot of trading history to work with but what we do see so far is positive. Aggressive traders could go long AZEK risking a close below $32." A $41 Point and Figure target was visible.
Let's check out the latest charts of AZEK.
In the updated daily bar chart of AZEK, below, we can see that the shares reached our $41 price target in January and kept going. A top does not appear until April when prices made new highs but the On-Balance-Volume (OBV) line made an equal high versus February for a bearish divergence. The OBV line tells us that sellers have been more aggressive since late April.
The Moving Average Convergence Divergence (MACD) oscillator made a lower high for another bearish divergence. Prices just closed below the cresting 200-day moving average line.
In the weekly Japanese candlestick chart of AZEK, below, we can see a picture that points to further price weakness. Prices have closed below the cresting 40-week moving average line. The middle of the large red candle in early May is likely to act as resistance -- the $47 area.
The weekly OBV line is pointed down as sellers have become more aggressive. The trend-following MACD oscillator is in a take profit sell mode.
In this daily Point and Figure chart of AZEK, below, we can see the software is projecting a downside price target in the $38-437 area.
Bottom-line strategy: The charts of AZEK are pointed a little bit lower. Further price weakness may not be a buying opportunity as we need to see how traders react. Will the OBV line start to turn upward? Let's wait and watch a bit longer.