|PAA Monthly Chart|
The RSI(9) oscillator does signal a bearish divergence on both the highs and the lows, however, so continued weakness appears to be in the offing. From the overall monthly pattern, we do expect a Wave-C to the downside, however given the volume signature in December 2015 through February 2016, we believe significant demand exists between $15.00 and $17.00, so it's not likely for Wave-C to travel below those levels. Watch for a shallow correction from the current level.
|PAA Weekly Chart|
|PAA Daily Chart|
The other major warning sign is a diagonal trend line that starts in April 2016 and had seven firm touches before being penetrated to the downside on 12 January 2017. Since then, it has acted as resistance with three touches.
Volume since the first of the year has been bearish as well. Notice the extremely weak volume over the first week of February, and notice the falling volume in general for all of 2017. Interest in the stock appears to be waning, and demand is required to drive price higher.
From a fundamental perspective, we see that PAA lowered its dividend from $0.70 to $0.55 in October, 2016. This is accompanied by nine consecutive quarters of missed revenue, and 5 out of 10 quarters of missed earnings. "Troubled" would be the best way to describe the company. Trading at a P/E of 78.38 - nearly triple its nearest competitor - it's hard to envision much in the way of an upside, even with the favorable energy infrastructure outlook fostered by the current US Administration.
The only play we see for PAA is to the short side. We are looking at two possible entry points. The first is a short trade on a close below the support line of the wedge. In that case, we'll place a protective stop just above the horizontal resistance line around $33 and we'll set a price target at the horizontal support line around $25.
The second potential play is if price rises a bit further within the wedge. In that case, we'll watch for a reversal at one of the three major resistance lines: the diagonal resistance line (in red), the blue horizontal resistance line, or the top of the wedge. A reversal at either of those points will signal a short entry with a protective stop above the next highest resistance line. Again, our target will be the horizontal support line around $25, although we'll watch for an early exit if the wedge support line appears to hold. Watch this one carefully since the breakdown, when it comes, may be swift.