|NWL Monthly Chart|
What we can see from the monthly is that a motive wave started at the end of the financial crisis in 2009. A full five waves also completed in August, 2016. A corrective pattern following that 5-wave impulse is now in progress. Whether or not Wave-A is complete on the monthly, however, remains to be seen. The retracement level, however, suggests there's more room to move to the downside.
The RSI(9) oscillator on the monthly chart shows a strong bearish divergence. That divergence ran virtually the entire length of the uptrend, in fact, signalling intense weakness could follow. The MACD agrees. While the MACD ascended in conjunction with the uptrend, it did so with numerous signal line crossovers indicating an overall weakness in the move. A bearish crossover immediately followed the peak, and the distance between the main line and the signal line is widening. That, too, suggests the downward move is not yet over.
|NWL Weekly Chart|
Volume is declining, which adds to the bearish sentiment, although it looks like supply has waned significantly in the last few weeks. It's not coming close to the volume experienced in Wave-iii, although in a counter-trend wave, that really isn't much of a surprise.
RSI(9) on the weekly is, at the very least, confirming price action. When we look at the lows, we can conclude that a bearish divergence is evident, although it can be debated that the last valley wasn't low enough to support that conclusion. Given how low it was compared to the prior valley in price and indicator, it does suggest to me that there's plenty of weakness remaining.
MACD, on the other hand, does show a bullish crossover, and it does not confirm the divergence suggested in the RSI. That MACD signal is the only indication we have that the downward move in Wave-A may be at an end. For now, however, I'm trusting the wave count and the overall price pattern, and that tells me there's more room to the downside.
|NWL Daily Chart|
The current pattern leading into Wave-A comes into much better focus on the daily. The three sub-waves that completed already are well defined, and Wave-iii subdivided into five sub-waves that are also very well defined. Wave-iv is a bit more complex, and it appears to be an irregular a-b-c corrective wave with Wave-c ending in a diagonal. It's likely, based on this, that Wave-iv is complete and that suggests the next move is to the downside to finish Wave-v.
I'd now like to draw your attention to the resistance lines that are all converging over the course of the next three days. There's a significant amount of pressure on the stock at this level, and when we look at the volume signature for today's long bullish candle, we can see that the conviction to the upside is really not that strong.
The RSI(9) shows fundamental weakness that has plagued the stock since the Wave-5 high, and that weakness continues through the current move. The MACD experienced a bullish crossover today, however that indicator has been extremely choppy for the past couple of weeks and I would not consider it reliable at the moment.
The pattern formed by the short-term resistance and support lines shows a symmetrical triangle pattern with price rapidly approaching the apex. We need to watch the next move closely. It's certainly possible, from the current position, that the stock breaks through resistance and starts a Wave-B move. It's more probable, however, that price moves to the downside and tests support (at a minimum) and possibly breaks to the downside.
We're going to trade this stock based on the breakout direction. If we see a break above resistance with confirming volume, we'll take that trade to the long side. That would indicate that Wave-B is in progress, and we'd set a conservative price target around $51.84, coinciding with the bottom of the 29 July exhaustion gap and the 61.8% retrace of Wave-A.
If, however, we break below support, we'll take that trade to the short side. Our price target will be in the $41.72 range, coinciding with a support line, the 61.8% retracement of Wave-5, and the price projection obtained from the weekly. In either case, the protective stop would be above the resistance pattern for a short trade and below the support pattern for a long trade. Either way, there's a decent reward to risk ratio, although it does look a bit better to the short side.