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Washington Post (WPO) forms relative base

April 15, 2013

As well as publishing the newspaper of its name, The Washington Post Company provides education and training services.

WPO has been in a long term downtrend against the SPDR Consumer Discretionary (XLY). The 12 and 26 week moving averages crossed in March 2009 and did not cross again until February this year.

WPOXLY WEEKLY

In my moving average crossover method, I ideally look for cases where the averages have not crossed for four years. This is one month short of that mark.

The late 2011 MACD low was a bullish divergence but it required more divergences in May and October 2012 before the low was seen. Waiting for a moving average crossover is a safer tactic than picking divergent lows.

Daily chart

WPOXLY DAILY

Following the 19 February crossover, the ratio formed a bearish divergence on the 14 day RSI on 25 March. As mentioned earlier today, bearish daily divergences can be used as a reason to take a position off, or delay putting it on. Since 25 March, the ratio has pulled back 5.8% towards the moving averages and the RSI is mid range.

Summary

The long term moving average crossover signals that the underperformance of WPO is over. A new trend of outperformance may have started and with the short term ratio having unwound, now is the time to go overweight WPO in a sector portfolio.

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