Comcast Underperforming And Under Distributed

08/22/03 01:11:56 PM

by Arthur Hill

Since achieving its double bottom target in June, CMCSA has started to weaken and OBV shows distribution.

Security: CMCSA
Position: Sell

For a little background, let's review the double bottom breakout in January. Comcast (CMCSA) formed a double bottom in July/October 2002 and broke resistance at 26 with a strong advance in January. The breakout confirmed the double bottom and projected an advance to around 35 (26 - 16.5 = 9.5, 26 + 9.5 = 35.5). Flash forward and we see that CMCSA came within 65 cents of this target with a high at 34.85 on June 16.

Figure 1: Daily chart of CMCSA showing a double bottom breakout.

Since peaking on June 16, the stock has weakened considerably with support at 29 holding the key. CMCSA broke below the trendline extending up from Dec-02. This trendline was touched at least three times and should be considered valid (gray arrows). The stock gapped higher on July 7th, but this gap failed to hold and the stock returned to support around 29. The pattern over the last few months looks like a small head-and-shoulders with neckline support around 29. A move below 29 would project further weakness to 23 (35 - 29 = 6, 29 - 6 = 23).

Figure 2: Head and shoulders formation on CMCSA.

Graphic provided by: MetaStock.

Two key indicators show underperformance and distribution. CMCSA outperformed the S&P 500 from Dec-02 to Apr-02. The stock raced to a new high in June, but the price relative failed to keep pace and formed a lower high (bearish divergence). The price relative has since trended lower and moved to its January reaction low. Similarly, on-balance volume (OBV) formed a bearish divergence and moved to its lowest level since December. Current weakness in both of these indicators increase the odds of a support break and lower prices in the next few weeks.

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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CHART ANALYSIS

Comcast Underperforming And Under Distributed

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