A current long-term overbought condition triggered a long-term overbought signal Monday in shares of oil-services provider Weatherford International (WFT), which traded down on the day.
The trigger alerts me to review the chart, not to rush out and sell it. It is very important to do the homework and then decide what the next step should be.
After the homework was done, Weatherford had support at $15.89 (0.236 retracement). This is from the Feb. 28 high of $16.77 and the Feb. 3 low of $13.07. The last long-term overbought signal sent WFT 24% lower to the Feb. 3 low of $13.07. WFT then rallied 28% from the $13.07 low with the long-term oversold signal generated.
Now, WFT has a long-term overbought signal in place with resistance above: the Feb. 28 high of $16.77 and the Nov. 11, 2013, high of $17.38.
Do you really want to ignore these long-term signals? How can you trade Weatherford now? I would reduce any longs into the $16.77-$17.38 resistance zone. With a close below $15.89, I would certainly reduce the longs and have aggressive traders looking to short.
I will follow up to see if Weatherford can weather the storm ahead.
At the time of publication, Berman had no positions in the stocks mentioned.