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UCL Poised To Gush

09/09/04 11:45:24 AM
by Arthur Hill

Unocal (UCL) has been range bound since 2000, but the daily and weekly chart point to an upside breakout.

Security:   UCL
Position:   Buy

Let's start with the weekly chart for some perspective. The stock has traded between 25 and 40 since October 1999. Unocal tested upper range resistance around 40 in Dec-00, May-01, Apr-02 and most of 2004. The stock tested lower range support in Mar-00 and Mar-04. Interestingly, the first bounce off support (Mar-00) occurred with weakness in the broader market (namely techs) and the second coincided with a broad market advance that began in Mar-03.

Figure 1: Weekly chart of UCL.
Graphic provided by: MetaStock.
 
Resistance at 40 is clear and a break above this level would forge a multi-year high and be most bullish. Notice how the stock advanced from Mar-03 to Jan-04 and then began to consolidate between 34 and 40. This pattern looks like a sharp advance and large flag. A break above 40 would signal a continuation of that advance and project further strength towards 50 over the next few months.


Figure 2: Daily chart of UCL.

Turning to the daily chart, we can focus on the range for 2004. First, notice that the highs all failed to hold above 39 and it would take a move above 40 for a convincing breakout. Second, the May low (head) is lower than February and August lows (shoulder). Although not picture perfect, this makes for a head and shoulders of the continuation sort. A move above the neckline resistance zone (39-40) would signal a continuation higher and project further strength to the mid-forties (39 - 34 = 5, and 39 + 5 = 44).

There is one more pattern at work and this one suggests that a resistance zone breakout is imminent. The stock formed a large triangle from May to September (blue trendlines). These are consolidation patterns and the move above the upper trendline and June/July highs is bullish in and of itself.




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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