Whilst many US stocks have mirrored the price action on the primary indices over the last few months, falling and then recovering, this has not been the case for Walgreens Boots Alliance (WBA) which has continued lower under the weight of a bearish technical picture and poor earnings, with a big miss in April adding to an already bearish picture. This fundamental driver is clearly in evidence on the weekly chart for the stock with the widespread down candle on ultra high volume injecting further downside momentum in April, that has continued to weigh heavily as the stock sinks further, and with no signs yet of any market maker buying, the longer term outlook remains very bearish.
What is interesting about the chart is the appearance of the volatility indicator which is unusual on a slow timeframe such as this, and yet as always reveals what to expect following its appearance. The volatility indicator is triggered when price action moves outside the average true range and the expectation is for price action to either consolidate or reverse as a result. The reason for this is simple. Volatility and insider participation go hand in hand and as such, fast moves in any market provide the ideal opportunity to trap trade investors and traders into weak positions on the reversal. And on the weekly chart, we have two examples, the first signalling a reversal, the second consolidation before there is a continuation of the primary bearish trend.
The pattern for this stock now seems to be set, with minor rallies higher punctuating the move lower, and until we see major accumulation, a move through $50 now seems likely. Indeed the monthly chart is interesting here, with rising volumes and falling prices confirming this sentiment, and with the trend monitor now in transitional phase, and with a low volume node ahead, $45 now seems to be the next possible pause point. Thereafter a return to the volume point of control at $35 longer term may be achieved.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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