We reviewed the chart of Unity Software (U) on Feb. 2 and wrote that "Shares of U could stage a rebound into the $130-$140 area in the next few weeks, but I do not feel all that comfortable in recommending a trade as other bounce candidates are more appealing."
In this daily bar chart of U, below, we can see that prices rebounded to $120 and stopped short of our anticipated target in the $130-$140 area.
Let's check on the charts of U again as they are poised to make a new low close for the move down today.
In this daily bar chart of U, below, we can see that prices are below the declining 50-day moving average line and below the rising 200-day line. A bearish dead or death cross of these two averages can be seen in mid-February. Trading volume has been heavy the past four months. The On-Balance-Volume (OBV) line has only made a modest decline. The 12-day price momentum study shows higher lows from December telling us that the pace of the decline has been slowing. This is a bullish divergence when compared to the price action.
In this weekly Japanese candlestick chart of U, below, we see a mostly bearish picture. Lower shadows near $90 tell us that traders are rejecting the area but we are likely to close below $90 this Friday and that would refresh the downtrend. The weekly OBV line is flat after a decline. The MACD oscillator is bearish.
In this daily Point and Figure chart of U, below, we can see a potential downside price target in the $65 area.
Bottom line strategy: Avoid the long side of U as the charts are still pointed lower.
