NEW YORK (TheStreet) -- A promising housing market had shares of Mohawk Industries (MHK) setting a series of all-time intraday highs so far in 2015. The latest was $188.29 set on March 31. But since then the housing market has stalled and now the technical charts are negative for the provider of flooring products.
Analysts expect Mohawk to earn $1.61 a share when it reports earnings after the closing bell on Thursday. This report is critical for the stock as the company has an earnings winning streak of 12 consecutive quarters. If the stock pops on better-than-expected earnings, investors should sell on strength because of those negative daily and weekly charts.
Let's look at the daily and weekly charts for Mohawk and provide the key technical levels at which to buy on weakness and the key technical levels at which to sell on strength.
Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.
Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.
Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.
A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.
A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.
Here's the daily chart for Mohawk.
Courtesy of MetaStock Xenith
Mohawk had a close of $175.47 on Wednesday holding onto a 13% year-to-date gain, but the stock is 6.8% below its all-time intraday high of $188.29 set on March 31.
The stock has been above its 200-day simple moving average since Oct. 31 when this average was $137.32. The stock gapped higher on Feb. 20 following an earnings beat on Feb.19, but the stock has been below its 50-day simple moving average of $180.83 since April 23 and filled the gap to the Feb. 19 high of $174.80 on April 30. The downside risk is to the stock's 200-day simple moving average now $156.08.
Here's the weekly chart for Mohawk.
Courtesy of MetaStock Xenith
The weekly chart for Mohawk is negative with the stock below its key weekly moving average of $178.33 with its projected momentum reading of 65.78 down from 71.48 a week ago. The 200-week simple moving average of $109.30 is the longer-term uptrend and the "reversion to the mean" last tested at $51.81 during the week of Dec. 2, 2011.
Investors looking to buy Mohawk should place a good till canceled limit order to purchase the stock if it drops to $109.96, which is a key level on technical charts until the end of 2015.
Investors looking to book profits should place a good till canceled limit order to sell the stock if it rises into the $177.76 to $181.91, which are key levels on technical charts until the end of June.