Sears Holdings SHLD Steady Price Plunge

Nov 18, 2008: 3:01 PM CST

Sears Holdings (SHLD) is a large retail stock I tend to follow from time to time, but today I noticed just how far the stock has fallen this year and since 2007.  Let’s take a look at the devastation long-term SHLD investors have endured recently.

SHLD Weekly Chart:

Price reached an all-time high at $190 in April, 2007 before breaking weekly EMAs and switching its trend officially from up to down (lower lows and lower highs) which has not changed as we step into the present new lows beneath $30.00 per share.

It would seem that a counter-trend move up may be likely, but that doesn’t change the pervasive down-trend structure.

A casual look at the weekly chart shows key EMA resistance holding at mostly the 20 week EMA, with the most recent counterswing up taking us to EMA resistance via the falling 50 week average.

One thing I wanted to highlight was the multi-swing positive momentum divergence that continued for almost a year as price continued its journey lower.  The divergence was only good enough to give us a move from $70 to $100 per share before the downtrend took over and became the dominant structure.

Price has now made a new momentum low and the divergence pattern has worked its way through price and no longer has any effect at the moment.

One note of possible bullishness is that the volume pattern has declined as if volume is not confirming these new price lows – or at least volume is setting up a potential non-confirmation.  Keep an eye on that.

Let’s zoom in to the daily chart.

SHLD Daily Chart:

The daily chart shows a few momentum divergence examples along with key EMA tests in terms of how price reacted to these technical ‘nodes.’

The most recent cuonterswing formed on a positive divergence which took price only to the falling 20 EMA before reversing and resuming the dominant downtrend in price.  Watch to see if price can form a positive momentum divergence off these levels and if so, it would indicate more risk remains on the short-selling side than the long side – at least in the near time frame.

Sears Holdings (SHLD) helps remind us not to bet against prevailing downtrends and privides a few lessons for us in terms of basic chart analysis.

Update: Andrew Horowitz of the Disciplined Investor site (with excellent weekly Podcasts!) posted his take on Sears and Stock Valuation last year which includes an excerpt from his book which I highly recommend entitled The Disciplined Investor.  He was quite precient in his analysis!

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