Don't Ignore This Chart!

Rockwell Automation: A Big Correction, but an Even Bigger Advance


Rockwell Automation reversed its downtrend with a big surge in May, worked off overbought conditions and looks poised to resume its uptrend.

The chart below shows ROK with a high-volume plunge in late April, a high-volume reversal day and a sharp recovery in early May.  This recovery extended with high volume as the stock broke above the April high. The strength of this advance leads me to believe that it reversed the downtrend from January to April.

Rockwell was quite overbought in late May and worked off this overbought condition with a pullback to the breakout zone (175-178). Notice how the broken resistance zone turned into a support zone as the stock firmed for two weeks. Signs of an upturn are emerging as the stock moved higher the last four days.

Even though the chart above covers a full year, it does not put this decline into perspective. The next chart shows weekly bars over the last three years. Note that ROK advanced some 150% from January 2016 to January 2018. This year's decline retraced 38.2-50% and formed a falling wedge. Yep, the retracement amount and pattern are typical for corrections within a bigger uptrend. ROK broke out of the wedge in May and it looks like the bigger uptrend is resuming.

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- Arthur Hill, CMT

Senior Technical Analyst,

Book: Define the Trend and Trade the Trend
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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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