DuPont rallies but does it have the right formula for a sustainable rise?

Chemicals giant DuPont (DD) reported earnings on Tuesday morning and the stock is trading higher as the company beat estimates and increased its dividend to shareholders. Let’s look at the charts to see if this will be a lasting price force.

In this daily bar chart of DD, below, we can see that stocks have seen choppy price movements over the past three months. Prices just broke above the 50 and 200 day moving averages.

The On-Balance-Volume (OBV) line shows improvement from September but weakness from January. The MACD (Moving Average Convergence Divergence) oscillator is bearish.

In the weekly Japanese DD candlestick chart below, we can see upper shadows on recent candlestick patterns. This tells us that traders have rejected the highs and that a sustained rise will need to trade above these highs. Prices are testing the 40-week moving average.

Trading volume was light and the weekly OBV line looks uninspiring. The MACD oscillator descends towards the zero line.

In this daily dot-and-digit chart from DD, below, we can see a potential upward price target of $87. A trade at $74 will weaken the chart.

Basic strategy: In our May 4 DD review, we wrote that “DD charts are set to go higher. Traders could be long DD at current levels and above $80. Risk at $73 for now. $87 is our first price target.” Unfortunately, this rally collapsed in June and I am hesitant to recommend the long side of DD again in this weak market environment. A weekly close below $73 will tip the charts lower.

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