Since that time, however, the stock has dropped 13%, returning to a key technical area of support. The integrity of this level will determine the intermediate-term direction of the stock price.
Whether it holds or breaks down, it is presenting a trading opportunity.
The chart shows the move off the low this summer, establishing a five-month uptrend line, which is now merging with the rising 200-day moving average and the horizontal trend line drawn off the August high and the October low. The technical significance of this level is increased by the intersection of these trend lines and the key moving average.
Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and is crossing below its center line on both time frames. The relative strength index is below its 21-period average and center line. These indications reflect the loss of positive momentum since the October high.
The vortex indicator is designed to identify early shifts in trend direction, and it made a bearish red-over-green crossover last week, suggesting a continuation of the move lower. This week the money flow indicators turned down, with the accumulation/distribution line crossing below its signal average and Chaikin money flow continuing its slide lower, and crossing into negative territory.
In the last two sessions, the stock has traded in an unusually narrow range just above the reinforced support in the $34.50 to $34.75 area. While the short-term trend and the accompanying technical indicators suggest a breakdown, the pause at this key level could be an early sign of a reversal.
The aggressive play is to buy a wider-range upper-candle close above support or sell short a lower-candle close that breaks support, using the key level as a reference point in placing protective stops.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.