Figure 1: Weekly chart of DJUSWC.
The weekly chart shows a pattern familiar to many telecom, dotcom and technology stocks. After peaking in early 2000, a severe decline ensued and lasted until October 2002. The advance from October 2002 to the present formed a rising wedge that retraced a portion of the prior decline.
|The Mar-00 to Oct-02 decline was especially severe for DJUSWC and the current advance from 104.49 to 301.44 has retraced less than 20% of the prior advance. The rising wedge is a potentially bearish pattern, but the trend is clearly bullish as long as the lower trendline holds. A move below the lower trendline (currently at 255) would signal a continuation of the prior decline and project further weakness below the October 2002 low.|
|Figure 2: Daily chart of DJUSWC.|
|Graphic provided by: MetaStock.|
|Turning to the daily chart, the DJ Wireless Communications Index also remains in an uptrend with a rising flag or price channel forming over the last two months. These are also potentially bearish patterns that require confirmation with a trendline break. In addition, there is broken resistance (turned support) around 268. As long as this support line holds, the bulls get the benefit of the doubt. A move below 268 would be bearish and at a 50-62% retracement of the prior advance (194.5 to 301.88) would then be expected.|
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