|Q Daily Chart|
When we look at the volume pattern, the amount of supply that's evident appears stronger than the amount of demand, and we can see the overall strength of the down days in general. As an added point of confirmation, the On Balance Volume (OBV) indicator (shown in orange above volume) continues to decline. That's an indication that shares are being distributed, not accumulated, and it's an extremely bearish sign.
Curiously, we don't see a divergence on the daily RSI(9) oscillator. Instead, it's merely echoing the price action. In itself, it's not giving us much of a clue as to where Q intends to breakout, although the price action implies a downward break in the short-term.
Finally, notice the peaks on 5 October, 29 November, and 15 December. With those peaks, we have at least a double top formation with the first two, and the last one arguably creates a triple top. The pattern is not confirmed, of course, since we've yet to close below the neckline at $70.10, however it's definitely a major flashing warning light.
A double top appears on the weekly chart as well, and that formation is more ominous. The left peak dates to late July 2015 and the right peak is in late September 2016. The neckline on this longer term pattern is $55.01. Note that meeting the price target of the daily chart double top would approach that weekly neckline.
|Q Weekly Chart|
That wedge we see on the daily chart extends out to an ascending triangle on the weekly chart. That's also considered a bullish pattern. The volume pattern is somewhat neutral on the weekly. There's certainly some heavy supply early in the triangle, but following that one climactic week there hasn't been much follow-through in either direction.
The one major caution sign on the weekly chart is the RSI(9) oscillator. Unlike the daily chart, there is definitely a bearish divergence on the weekly. That's warning us of potential trouble ahead, and points to a possible downward break, at least for the short term.
Here's a case where we really need to give the stock some reins and see where it wants to lead us. If we get a downside breakout on convincing volume, I'll play it. The wedge is showing a potential 7 to 10 point move in either direction, and that's worth trying to capture. A stop a few percent inside the pattern to give it room for a pullback would still be a good reward to risk ratio, and likely keep us out of a shakeout flip.
A break to the upside, however, may signal the start of Wave-3 on the weekly chart, and we definitely want to ride that one. Again, however, we need to see convincing volume, especially given the number of failures off that resistance line thus far.
That, in fact, is the third potential setup. A failure off resistance will be an excellent short opportunity. The moves down from resistance have been swift to date, and our stop would be just above the resistance line. Again, that's a fantastic reward to risk ratio.
Let's see which of the setups will actually trigger. With several very good plays lining up in either direction, we'll add this to our watch list.