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CHART ANALYSIS


Thunder Energy Long-Term View

09/29/04 10:24:57 AM
by Gary Grosschadl

With oil markets heating up again the past several weeks, many traders are looking at oil stocks.

Security:   THY.TO (TSX)
Position:   Hold

Recently, a trader asked me about the longer-term chart prospects of this junior Canadian prospect -- Thunder Energy, trading on the TSX (Toronto Stock Exchange). The daily chart is showing some recent bullishness, which is no surprise, but what of the long-term picture?

This weekly chart shows THY in a longer-term uptrend being above its 200-period exponential moving average (EMA). However, some warning signs are appearing. Note the good support of the 50-period EMA during this uptrend. This was recently violated, and it is being tested again. A look at some pattern recognition suggests a possible topping formation in the form of a complex head & shoulders pattern (complex because of its multiple shoulders). Where to draw the slanted neckline is somewhat subjective, one possible interpretation shown on the chart. If you draw another trendline connecting the major "tail" lows, you can also conclude that a three-year trendline has been broken to the downside.


Figure 1: Thunder Energy. The weekly chart hints at possible weakness ahead.
Graphic provided by: StockCharts.com.
 
Failure at either the 50-period EMA or the higher slanted neckline may bring a lower test of stronger support near the 200-period EMA, currently 5.54 or the $5 mark. However, the first line of support is the previous low of approximately $6.40. A move under this line could be another warning bell.

Several other indicators can be considered. The upper indicator shows the directional movement indicator (DMI). The average directional movement index (ADX) or trend strength component shows the current bear trend is getting weaker, but until the DIs actually cross, the jury is still out whether the bulls can take charge. The lower indicators -- relative strength and stochastics -- both show a move to their respective 50 levels. This is often a key area for these indicators and can act as a stall point. A move above this level is bullish but a stall is bearish.

Whether this turns out to be a topping formation remains to be seen. My line in the sand is shown at the $6.40 level. A violation here can bring those lower tests at $5.50 and $5. Should the stock continue higher, above the slanted neckline (approximately $7.40), then the bulls resume control for another attempt to challenge the top of the right shoulder.



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

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Comments

Date: 10/01/04Rank: Comment: Why do all chartists use sma 65 or in your case ema 60 on vol. can we use lower vol days like a 10 or 20? in case of newly listed securities what would you use? pls reply sekhar krishnan
Date: 10/01/04Rank: Comment: Why do all chartists use sma 65 or in your case ema 60 on vol. can we use lower vol days like a 10 or 20? in case of newly listed securities what would you use? pls reply sekhar krishnan esskay6268@yahoo.com
Date: 10/01/04Rank: 4Comment: 
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