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Brief? Brilliant? Ascending Triangles

March 22, 2007
tags: , ,

Last night I did a quick glance through the Market Posture page of the toolbox to determine relative strength simply by the most recent slope of each index’s 30 MA. I liked Semiconductors(SOX), Oil(OIX), Insurance( IUX), Retail(RLX), and Gold(GOX). Hi tech and Internet also seem relatively strong, but they are less focused when you look at their components, particularly Internet, so I try to ignore that one.
From the oil patch, here’s a beautiful pattern.
ARD – Very nice fundamentals. Major growth. I must be missing something, but with a trailing twelve months P/E of 33.46 and estimated average annual growth of 54%, that gives the stock a PEG of .62. VERY low, translated as cheap. It broke through resistance today, but the upper shadow of today’s candle leaves me skeptical. Nevertheless, this is an example of what an ascending triangle is supposed to look like. The bulls buy it up until a point of resistance is established. The bears sell it downward but they have less success with each swing before the bulls take over again. If momentum continues as it should, the resistance line should be obliterated with volume for a move into new territory with clear blue sky overhead. Whether you take it now or wait for a test of new support, the line in the sand is at 47.50.
I measure the triangle as 10 points high, giving a target of 57.50 in about 2-3 months.
Be careful for earnings on March 26.

Here’s a retail play with good fundamentals.

GES. Nice ascending triangle about 5-6 pts. high for a target of 48 or so. Interesting to note the gap from good earnings and how the stock gapped down to open at the bottom of that gap on the 27th when the whole market gapped down. But it did rally back that day for only a small loss, which I would say is a good sign of relative strength.

I’m no pro on sector rotation, but I think this just might be one of those “flight to safety” kind of stocks.
UNH – This one isn’t quite as clean as the others, but it’s worth considering. I’d look for a target of 59 or so.

The longer term picture on UNH is important to consider. It does seem to be making a comeback, but there is certainly potential resistance along the way.

Okay, so it wasn’t THAT brief. But a step in the right direction.

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