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Negative Divergence And A Bullish Chart For Speedway Motorsports

|Includes: Speedway Motorsports, Inc. (TRK)

The chart below is of the Speedway Motorsports ($TRK) stock price trends versus MACD from Oct. 15, 2014 until Feb. 4, 2015. This chart is both as interesting and exciting to watch (for this investor, anyway) as any car race could ever be.

Speedway Motorsports chart Feb. 4, 2015

What makes this chart both interesting and exciting is that the share price for Speedway Motorsports has maintained a rather strong bullish move through a well-formed ascending channel while the MACD has visited two lengthy bearish periods. These periods are indicated in the chart by the yellow fields.

What chartists normally see in stock charts is that when the MACD makes a bearish cross, the price has already been in bearish descent for a period of a few days. As the MACD continues its bearish descent, so does the share price.

What has been occurring with share price versus MACD movement in Speedway Motorsports is contrary to the norm. Investor's have been able to fend off bearish times and maintain positive growth in the share price for the company.

On Feb. 3, 2015 the MACD made a bullish cross ending a 34-day long bearish trend. Price opened at 22.97 and was pushed to a low of 22.64, but positive investor sentiment for the stock won out and after all was said and done the bulls defeated the bears with a small but important gain of 0.07 closing at 23.01 for the day. The candlestick formed by this price action was a White Hammer (also referred to as a White Hanging Man), which is considered to be a bearish reversal indicator with low reliability when located at the top of a bullish price trend.

On Feb. 3, the bulls at Speedway Motorsports were able to fend off the bears once again, proving the White Hammer wrong and ending the day with a gain of 0.01 over the previous day. This was, however, on a day where 61.6% of the market was in decline following the huge buying spree of the previous day.

The image below shows, on its left, the actual bullish cross formed by the AMCD for Speedway Motorsports. On the right side of the image is a drawing of the type of action that we'd most likely have to see in the MACD over the next day, or so, in order for the bullish price trend of this stock to reverse direction and become bearish.

MACD required to cause trend reversal for TRK

Though possible (anything is possible in the stock market), it is mostly unlikely that the MACD would make such or sharp reversal and that the share price trend would also make a reversal after investors have already demonstrated such a long period of strength in the face of the last two bearish MACD trends.

Volume was down on Feb. 4, 2015 little more than half of normal volume for this stock. I can only speculate and say that investors were taking a step back, relaxing for a moment after struggling so hard against the bearish MACD trend, and recovering from the previous day's bullish market activities.

It is this investor's opinion that an investment in Speedway Motorsports would be a sporty and exciting move for anyone to make. If you're going to get in, though, then you're going to have to hurry because this race to profits is about to get underway.

Disclosure: The author is long TRK.