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CHART ANALYSIS


Island Reversal For Sun Microsystems (SUNW)

06/26/03 09:49:49 AM
by Gary Grosschadl

A powerful topping pattern hits this high tech stock.

Security:   SUNW (Nasdaq)
Position:   Sell

An island reversal pattern occurs as a topping formation when two gaps mark either side of a series of closes. These gaps appear to leave a set of higher data points "stranded" thereby leaving an "island" behind. That this occured with high volume shows conviction by sellers.

Alert traders should have spotted trouble a week earlier when another candlestick topping pattern was put in via a bearish engulfing pattern at the previous top. Again volume gave a valuable clue as the top was on lower volume showing less conviction by the bulls.

Daily chart for SUNW.
Graphic provided by: stockcharts.com.
 
The directional movement indicator (at the top of chart)shows a trend change is likely occuring as the ADX line is reversing off a peak while the DI lines are nearing a bearish crossover. An actual crossover confirms this bearish intent. The other displayed indicators are also showing bearishness via another bearish crossover (MACD) and movement down from overbought levels for RSI and stochastics.

Two common Fibonacci retracement levels are shown on the chart as possible support areas. These are derived from the high and low of the chart. The lower one being more meaningful as it also coincides with the 200-day exponential moving average. Failure there would then bring the $4 support level into play.



Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

Website: www.whatsonsale.ca/financial.html
E-mail address: gwg7@sympatico.ca

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Date: 06/27/03Rank: 4Comment: 
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