Morgan Stanley (MS) beat expectations for its latest earnings numbers Thursday morning. However, the shares weakened from their midday high. Let's check on the charts a bit closer to see what's happening with the stock.
In the daily bar chart of MS, below, we can see that the shares have been in an uptrend from early November. Prices look like they have turned sideways from early June. Prices have been testing the rising 50-day moving average line.
Trading volume has been steady since October but an increasing pattern of volume would have been preferred. The On-Balance-Volume (OBV) line shows a rise into early June.
The 12-day price momentum study shows lower highs from May to June to July to tell us that the pace of the advance is slowing. This could foreshadow a correction.
In the weekly Japanese candlestick chart of MS, below, we see a mixed picture. Prices are still in a longer-term uptrend above the rising 40-week moving average line. I do not (yet) find a top reversal pattern but candles are the fastest turning charts.
The weekly OBV line shows a longer-term rise but it has stalled in recent weeks. The 12-week price momentum study shows that the pace of the advance has been slowing since January.
In this daily Point and Figure chart of MS, below, we can see that the stock is pointed up with a higher price target ($106); however, a trade at $86.45 could start to weaken the picture.
Bottom-line strategy: If you were expecting MS to make new highs Thursday on the heels of its earnings report you'd be disappointed. Buy the rumor and sell the news is one of those old sayings on Wall Street that carries a lot of meaning. Be on guard for a downside reversal.
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