Whirlpool Corporation (WHR): Watch Out Below

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Whirlpool Corporation (NYSE:WHR) fell earlier this week after the company’s latest earning report for the first quarter. Net income was materially lower on a year-over-year basis, and the company reiterated its full year guidance.

Beat the Bell: Whirlpool Corporation (WHR)As a result, WHR looks set to fall lower in the near- to medium-term, setting up a well-defined trade.

When emotions get the better of investors, it rarely has a  happy ending. This certainly holds true for large trend-following cult stocks, but it also happens in less sexy stocks, such as Whirlpool.

Although WHR stock is not necessarily a notably volatile one on a day-to-day basis, over the past year and a half, it has displayed some serious trending moves where overstaying one’s welcome had nasty consequences.

Whirlpool Stock Charts

On the below multiyear chart, note that in the last quarter of 2014 and into Q1 2015, WHR rallied sharply, diverging from the more orderly multiyear uptrend that it had been working on since 2012.

By early March 2015, the rally had reached its apex, and investors not respecting the warning sign by the clear bearish reversal were quickly punished. By September 2015, the stock sliced through its 2012 support line, and WHR did not end this selling period until this January, good for a 40%-plus drop from the 2015 highs.

Just as quickly as the stock had topped out in 2015 it then began its next move up after a sharp bullish reversal in January. This rally until earlier this week measured close to 55% and saw Whirlpool stock bump into the former diagonal support line, which now looks to act as resistance. Once again, the stock is marking its weekly chart with a notable bearish reversal, and although this week is not yet over, I can’t help but wonder if another leg lower is brewing.

Whirlpool stock WHR
Click to Enlarge

Looking at the daily chart, we see that this most recent rally in WHR stock in terms of distance traveled and ferocity looks similar to the blow-off rally from Q4 2014 into Q1 2015.

Note also that from a momentum perspective, this recent rip has reached extreme overbought readings, with the MACD having reached its highest readings ever. This is significant and should not be underestimated, particularly as the red 200-day simple moving average currently coincides with a 50% retracement of the entire rally from January into last week, which could act as a well-defined next downside target.

The post-earnings down-gap earlier this week also cleanly broke WHR below its multimonth support line and further puts the odds in favor of at least a mean-reversion move to the downside.

Whirlpool WHR stock chart daily
Click to Enlarge

Active investors and traders could look to  short the stock or buy cheap puts or put option spreads on the stock with a first price target around the $160, particularly upon a weak weekly close this week.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/whirlpool-corporation-whr-stock-below/.

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