Viacom Inc. (VIAB) is the Stock of the Day at Real Money this Monday in the wake of its latest earnings report and talk of a merger with CBS Corp. (CBS) . Prices are slightly higher in pre-market activity so let's keep that in mind as we look at the charts and indicators for Viacom, which is a holding of Jim Cramer's Action Alerts PLUS charitable trust.
In this daily bar chart of VIAB, below, we can see a higher but choppy pattern from the late December low. There is a higher low in late March and another in late May. Higher highs can be seen in early February and the middle of April and July. By definition we have an uptrend of higher highs and higher lows, but it has been difficult trading VIAB as it has crossed back and forth around the 50-day and 200-day moving average lines.
The On-Balance-Volume (OBV) line shows a pattern that does not instill confidence, with late March as the low and then an uneven rise into July. This is not a pattern that says buyers have been consistently aggressive. The Moving Average Convergence Divergence (MACD) looks ready to cross below the zero line for a sell signal, which doesn't fit the pattern of an uptrend.
In this weekly bar chart of VIAB, below, we can see a much different pattern going back about two years. Here I see a large triangle-like pattern with prices moving in a tighter and tighter hi/lo pattern toward an apex. The slope of the 40-week moving average line is negative and the weekly OBV line has been neutral or balanced for two years. The weekly MACD oscillator is above the zero line but poised to cross to the downside.
In this Point and Figure chart of VIAB, below, we can see a minor downside price target of $28 projected. Even if prices declined to that area the pattern of higher lows would still be intact. A rally to $31.96 would refresh the uptrend.
Bottom Line Strategy: Potential deals and forecasting stock prices are a tricky situation in my experience. If I was a fly on the wall in the board room it would be a lot easier. VIAB could dip to $28, but strength above $32 should be bullish