Up until six weeks ago, 2023 looked like an uninspiring year for shareholders in KKR (KKR).
KKR is a global investment firm. And while it gently rallied for most of the year, a sharp sell-down in October had it trading back where it was in mid-January.
Yet all that changed in late October. A fresh wave of buying momentum sent KKR rallying off its lows.
KKR’s surge gathered further momentum from its November earnings beat.
But now KKR is up around 45% since its October 27 low. And it is showing signs of overheating.
So let’s see what’s in store from here…
Rising Sharply
After a sharp rally and pullback at the start of 2023, KKR traded flat from March to May.
But as the chart below shows, that’s when KKR’s profile started to change:
KKR (KKR)
Source: e-Signal
KKR’s rally from May onward coincided with two technical uptrend signals…
-
The Relative Strength Index (RSI) broke through resistance (green line) and gained a firm holding in its upper band. The RSI then tested and held support multiple times throughout KKR’s rally.
-
The shorter-term 10-day Moving Average (MA, red line) crossed above the 50-day MA (blue line) with both MAs tracking higher.
But after retreating from its September high, the RSI pattern changed.
Unlike when it tested and held support throughout its rally, the RSI couldn’t hold that level. Instead, it fell back into the bottom half of its range. That pulled KKR down.
The 10-day MA bearishly fell back below the 50-day MA and accelerated lower.
This short, sharp down move petered out as a converging pattern appeared (left orange lines). That’s often a precursor to a reversal.
Take another look:
KKR (KKR)
Source: e-Signal
The RSI found a base and rallied from oversold territory (lower left orange line). And KKR’s down move faded out (left upper orange line).
KKR then took off as the RSI jumped back into its upper band. And that move accelerated with KKR’s earnings beat on November 7.
You can gauge the strength of KKR’s current rally by the sharp angle of the 10-day MA crossing back above the 50-day MA.
But the RSI has reached overbought territory. And another reversal pattern is developing (this time a diverging pattern – see the right orange lines).
So what can we expect from here?
|
Free Trading Resources Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
Momentum Is Key
Although KKR has continued to make higher highs, I’ll be watching its momentum. That will ultimately decide where KKR is headed next.
If the RSI breaks lower from here, then that will pull KKR lower, too.
But we need to be patient and wait for a decisive move down before considering any short trade.
I’ll also be watching our two MAs. The 10-day MA has been accelerating above the 50-day MA for now.
So if the 10-day rolls over and retraces, that would add further confirmation of any developing pullback.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
Mailbag
Do you think KKR will be able to maintain its momentum? Send us your thoughts at [email protected]