Back on December 2 we reviewed the charts of Unity Software (U) and recommended that "Traders should focus on other stocks now. Stand aside and let U fall. If a new base develops we can take another look at some time." Traders got to sell out at our $206 price target before the bruising decline since the zenith in November.
Let's check the charts again.
In this daily bar chart of U, below, we can see some improvement in the indicators. Prices are trading below the declining 50-day moving average line and below the cresting 200-day line. The On-Balance-Volume (OBV) line has been amazingly steady the past three months.
The 12-day price momentum study shows a higher low from December to January telling us that the pace of the decline has slowed down. This is a bullish divergence when compared to the price action making lower lows. A bullish divergence can sometimes foreshadow a rally or bounce in price.
In this weekly Japanese candlestick chart of U, below, we have yet to identify a bottom reversal pattern. There is a lower shadow near $90 but I am not sure that is enough to get excited about. The slope of the 40-week moving average line is rolling over.
The weekly OBV line shows a decline but with the most recent plot indicating a slight move higher. The MACD oscillator is testing the zero line and starting to narrow.
In this daily Point and Figure chart of U, below, we can see a potential upside price target of $148.
In this weekly Point and Figure chart of U, below, we see that the $81 area is a possible price target.
Bottom line strategy: 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.
