Boston, MA 09/30/2013 (wallstreetpr) – International Paper Company (NYSE:IP) (Closed: $45.44, Down: 3.91%) opened very weak with a huge gap down and hit the low in the opening hour itself before closing slightly above it. The news about the company getting downgraded by Deutsche Bank affected the price a lot. The price action formed a narrow range Marubozu candle, with strong negative implications. The volume at 7 million was more than double the average volume of 3 million.
The volume has been decreasing for the whole calendar year and is just picking up now with the current fall. This means a lot of new sellers are coming to the market and the participants are more interested to distribute rather than buying.
The indicators are getting into the negative mode too as a lot of negative divergences are visible in the charts. The weekly RSI made a lower low when the price had hit a higher high at $50.33. The RSI also closed below 50 level last week, implying severe weakness and possibly the end of the uptrend from the June 2012 low of $27.29. The MACD, after a lower high again, is turning down rejected from its signal line. MACD Histogram is firmly in the negative territory.
On the other hand, we can see clear 5 waves from the June 2012 low of $27.29. It is highly probable that the 5 waves are over at $50.33 as it has firmly broken down below the 2 – 4 trendline when it came below $46. The other possibility of an Ending Diagonal or a Rising Wedge forming in the 5th will come only if the price whipsaws the trendline now. A move below $42.30 would put this alternate scenario firmly at rest.
The most probable scenario now would be that the price has started to retrace the entire rally from $27.29 and a deeper correction retracing the entire rally from the 2009 bottom of $3.93 is possible too. Investors could use any rally to exit the stock.
