AstraZeneca (AZN) reported better than expected EPS and revenue numbers this Thursday morning, but the price action may need a change of strategy. In our December 23 review of the charts and indicators of AZN we wrote that "Broadening patterns can be tricky to trade as they oscillate in a wider and wider pattern when we are more used to seeing patterns get tighter and tighter - like winding up a watch spring. Traders could go long AZN at current levels risking to $53. On the upside we look for new highs well above $64."
Prices did improve in January and stayed above our stop out point but the advance has not been as strong as anticipated. Even today's earnings beat is not "moving the needle" enough so we need to pivot in another direction.
In this daily bar chart of AZN, below, we can see that prices stalled at $60 just around the bottom of the price gap in November. With prices stopping at this point in the broadening pattern we discussed in December, the pattern is morphing into something else.
Prices are back above the popular moving averages that we follow but the On-Balance-Volume (OBV) line has weakened since the middle of January telling me that sellers of AZN are being more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator is hugging the zero line.
In this weekly Japanese candlestick chart of AZN, below, we can see a mixed picture. Prices are showing two upper shadows around $60 and AZN is trading around the 40-week line. The OBV line improved slightly in December and January but it is not leading the way with a new high. The MACD oscillator is close to the zero line and not showing us what we want to see.
In this daily Point and Figure chart of AZN, below, we can see that the software is now generating a downside price target in the $44 area.
In this weekly Point and Figure chart of AZN, below, we can see the same downside price target of $44.
Bottom line strategy: We could just recommend staying long AZN and tighten the stop but when the charts and indicators change it is wise not to ignore their message. Traders long AZN should take profits here and look for new opportunities elsewhere.
