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CHART ANALYSIS


Nortel Networks is Set to Slide

04/11/03 11:14:56 AM
by Andrew Hetherington

Here are a number of plays to make on a head and shoulders pattern currently forming on Nortel's chart.

Security:   CA:NT (TSX)
Position:   N/A


Figure 1: Nortel's daily chart.

Nortel's (NT) daily chart shows a 5-month head and shoulders pattern that some may even consider a symmetrical triangle. I prefer to call it a head and shoulders pattern. This pattern has the required volume diminishing slowly from left to right. There is a third fan line that is breaking which will indicate temporary weakness and a temporary change of direction from up to down. The next supports will be in the $1.30 to $2.00 area and this will be the likely stopping point where accumulation will begin. The all time low in the 0.70 cent area will not likely be seen again for some time but if the $1.30 support does not hold this will be an excellent place to accumulate a long position with a medium to long-term time horizon.

Figure 2: Nortel's weekly chart.
Graphic provided by: SuperCharts.
 
The weekly chart shows the excellent volume after the long downtrend. Normally, after the long trend is broken the equity will come back down and crawl along the trendline. This is the time to accumulate, but be cautious since it could nip below the line a little. Watch the volume carefully. When accumulation begins you will see the increase in volume on a continual basis.

These charts are in Canadian dollars but have the identical look form the American charts since it is a duo-listed equity.



Andrew Hetherington

Classic Dow Theorist who trades as a pure technician, using pattern recognition.

Toronto, Canada

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