KAR Auction Services (KAR) provides used car and salvage vehicle auction services.
The stock price moved above its 200 day moving average in August last year and began a one year ascent that saw a 54% gain. But since making an all-time high this year shares have pulled back sharply and returned to test the long term average.
This week KAR shares have been struggling to recapture the 200 day average, and there are some early technical signs that suggest this test will be successful.
A large hammer candle formed on the daily chart at the end of trading last week. A hammer is a bottoming candle.
The stochastic oscillator has moved out of an oversold condition and is tracking higher. This is in opposition to the stock price which has been lower, and is a bullish momentum divergence.
Also, Chaikin money flow is in negative territory but trying to move above its 21 period signal average.
There is still work to be done as far as price is concerned. The most important job is for KAR shares to trade back above the confluence of overhead trend line resistance. An upper candle close above the $57 level takes the stock price back into upper Bollinger band range and would suggest a bottom was in place.