Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

CHART ANALYSIS


Millennium Pharmaceuticals On Upswing

08/31/04 09:39:31 AM
by Gary Grosschadl

This stock appears to be coming off a bottom, similar to a double bottom in some regards.

Security:   MLNM (Nasdaq)
Position:   Buy

Since Millennium Pharmaceuticals (MLNM) slid under $16 last May, it has come all the way down to a psychological threshhold of $10. This may be the level where buyers become interested again. Although not a classic double pattern with a more pronounced "W" over a longer period of time, the volume characteristic fits the bill. With a double bottom type of move, a noticeable decline in volume should be seen on the second bottom. This is explained by diminished bearish forces. The bulk of the bears gave up the ghost on the initial bottom and at the subsequent bottom there are fewer bears selling the stock, resulting in lighter trading volumes.

The other markers for a move off bottom were the multiple positive divergences to price action. As price came down to another bottom, the indicators below the chart all show a higher bottom, which is bullish. The more divergences you find, the more likely it is that the stock will bounce.

Daily chart showing upside Fibonacci targets.
Graphic provided by: Stockcharts.com.
 
The directional movement indicator at the top of the chart also showed bullish promise during this bottoming phase. The very high ADX value is considered overheated and this tends to be a prelude to the DIs doing a bullish crossover, which shows bullish forces taking the upper hand over the bears. Some traders take an early cue from the ADX peaking and reversing while others may wait for confirmation of the DIs actually crossing. Ideally what happens next is that +DI upslopes to go higher until it assumes the ideal setup with the ADX line inbetween the DIs with +DI on top. This would show growing bullish trend strength.

Friday's close was very bullish as the stock price closed just above the 50-day EMA, something that hasn't occured since the initial decline from $18. This can indicate an early sign of trend change in the making. A more reliable sign of a trend change is a series of higher highs and higher lows; but MLMN is not there yet. Friday's move can also be seen as a move beyond a brief period of high consolidation.

Using Fibonacci retracement levels based on the significant high and low on the chart, upside targets can be pondered. When these Fibonacci levels are plotted, I pay particular attention to them if they relate to key previous levels of support and resistance, and this seems to be the case here. Note the area of the 200-day EMA is close to the 50% retracement level. This area will likely act as stiff resistance and a possible trading target for aggressive traders. The first target however is the 38.2% level at $13.35. A move back down below recent support of $11.50 would be bearish. In the meantime traders should watch for a move to the upside targets as discussed.



Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

Website: www.whatsonsale.ca/financial.html
E-mail address: gwg7@sympatico.ca

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 09/01/04Rank: 4Comment: 
PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.