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Telecom HOLDRs Take A Breather

02/10/04 09:21:35 AM
by Arthur Hill

After being one of the worst performers over the last few years, the Telecom HOLDRs (TTH) sprang to life from late November to early January. The stock is now consolidating with a bullish continuation pattern evolving.

Security:   TTH
Position:   Hold


Figure 1: Weekly chart of TTH.

Looking at the weekly chart, TTH broke above the trendline extending down from January 2000 with a strong advance in the first half of 2003. The stock pulled back from its July high (red arrow) and formed a higher low in October (green arrow). Notice how trendline resistance turned into support as the line extended into the second half of 2003. With a reaction low in October, a symmetrical triangle took shape and the breakout projects further strength to the mid 30s over the next few months. This target was found by extending a trendline parallel to the lower trendline of the symmetrical triangle.

Figure 2: Daily chart of TTH.
Graphic provided by: MetaStock.
 
Looking at the daily chart, the formation over the last few months looks like a cup with handle. Volume expanded as the right side of the cup formed and the handle represents a consolidation. These are bullish continuation patterns that require a break above the rim for confirmation. The rim is a resistance line that extends from the left edge of the cup to the handle (red line). A move above 29.5 would signal a continuation higher and project further strength to around 34. The height of the pattern (rim less base) is added to the rim breakout for a target. Look for volume to confirm any breakout.



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.

Title: Editor
Company: TDTrader.com
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Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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