Symantec Having Trouble At 50

07/25/03 10:25:47 AM

by Arthur Hill

Symantec has been battling with resistance in the upper 40s the entire year. With a head and shoulders taking shape over the last three months, the bear may be about to win the war.

Security: SYMC
Position: Sell

SYMC formed reaction highs between 45 and 50 no fewer than nine times this year. The June peak actually surpassed 50, but formed a shooting star in the process (red arrow). This peak exceeded the May high and the stock returned to support at 43 for the second time since May. After a low volume advance to 46.12 in early July, the stock is once again trading near support at 43 and the pattern looks like a head and shoulders. There are clearly two support touches to form the neckline and the June highs exceeded the May and July highs (left shoulder and right shoulder). A decisive move below 43 would confirm the head and shoulders as bearish and project further weakness to 36-37, a level confirmed by the April low.

Volume plays an important part in a head and shoulders formation. The stock advanced on high volume in late May and early June, but the July advance came on below average volume. This probably helps explain why the stock failed to even test the resistance line. Low volume reflects declining interest in the stock and diminished buying pressure. In addition, on balance volume (OBV) moved to a new reaction low recently. OBV is a daily cumulative indicator that adds volume when the stock is up and subtracts volume when the stock is down. The June advance barely registered on OBV.

Graphic provided by: MetaStock.

In addition to volume, SYMC shows poor relative strength. The price relative measures the performance of SYMC relative to the S&P 500. The price relative peaked in May and formed a bearish divergence over the last few months as the June high failed to exceed the May high. This suggests that SYMC is underperforming the S&P 500 and already becoming out of favor.

Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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Symantec Having Trouble At 50

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