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WEDGE FORMATIONS


Wireless Index Still Holding Important Trendlines

05/13/04 11:00:53 AM
by Arthur Hill

The Dow Jones Wireless Communications Index (DJUSWC) remains in both a long-term and medium-term uptrend with important trendlines still holding.

Security:   DJUSWC
Position:   Hold


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.



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
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E-mail address: arthurh@tdtrader.com

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