These three companies manufacture and market items found in the home and have been trading in similar consolidation patterns for the last several months above key Fibonacci support levels.
The stocks are retesting those levels. The technicals suggest they are ready to break out.
Mohawk Industries (MHK) - Get Report designs and manufactures home flooring products. Last month, the stock retraced 50% of its previous 2016 advance. It has been consolidating above that level for the last four months, forming an inverse head and shoulders pattern, and, for the last two months, a smaller fractal version above moving average support.
The $202.40 level is the neckline of both iterations, and it was tested and broken in Wednesday's session.
Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and is crossing above its center line on both time frames. The relative strength index is above its 21-period average and its center line. These are indications that reflect the positive momentum over the last month.
Chaikin money flow is improving but still in negative territory. But the money flow index, a volume-weighted relative strength measure, is above its center line.
The stock is a long candidate at its current level with an initial percentage stop under the neckline.
Shares of the spice and seasoning seller McCormick (MKC) - Get Report rallied in the first half of the year and then reversed, moving in a declining channel to a 62% retracement of its previous range.
McCormick has been attempting to hold this support and at the same time break above the intersection of the upper channel downtrend line, the 50-day moving average, and a horizontal resistance in the $93.50 area.
Moving average convergence/divergence made a bullish crossover this month, and the vortex indicator, which is designed to identify early shifts in trend direction, has made a positive green-over-red line crossover. Chaikin money flow is in negative territory but, again, the money flow index is tracking higher and above its center line.
The stock is a buy after an upper candle close above the $93.50 resistance level, using a trailing percentage stop.
Church and Dwight
Church and Dwight (CHD) - Get Report manufactures and markets household and personal care products. In the first half of 2016, its stock price moved steadily higher above a rising 50-day moving average. After a period of lateral consolidation, it dropped below the average and reversed direction, eventually gapping below its 200-day average before holding double bottom support at the 62% retracement level of this year's range.
There are conflicting signals in both price momentum and money flow indications. The relative strength index is relatively flat, while moving average convergence/divergence has made a bullish crossover and is heading higher. Accumulation/distribution is moving in parallel with a flat signal line, but the money flow index is well above its center line.
The stock price has been testing resistance in the $45 area, which is also the 50% retracement level of its 2016 range. But there are additional barriers overhead, including the 50-day moving average, the November gap, and the 200-day average.
A long position would require double confirmation in the form of two consecutive upper candle closes above the $45 level, and a close trailing percentage stop.
This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.