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CANDLESTICK CHARTING


Unisys And The Three White Soldiers

10/06/04 09:27:04 AM
by Arthur Hill

After basing and underperforming over the last three months, Unisys (UIS) is starting to show signs of life.

Security:   UIS
Position:   Buy

Since a sharp decline in July, Unisys (UIS) stabilized with support around 9.5 and resistance around 11. In fact, the stock has traded within a 1-1/2 point range since July 12. The range represents a consolidation and the next move is dependent on a break above resistance or below support. A resistance break would forge a bullish reversal and a support break would signal a continuation lower.

Recent price action points to a resistance break. The stock formed a bullish engulfing pattern (black arrow) and then advanced toward resistance. The stock formed five white candlesticks and the last two days featured above-average volume (green arrow).

Figure 1: UIS Daily
Graphic provided by: StockCharts.com.
 
But that's not all. The last three candlesticks formed a Three White Soldiers reversal pattern (green oval). Note that the open of the second was below the close of the first and the open of the third was below the close of the second. After each weak open, the stock recovered, closed strong, and forged a long white candlestick. Combined with volume, this shows good buying pressure.

So where do we go from here? A look at the past year can provide some clues. A break above 11.1, the consolidation high, would open the door to the 13-14 region. This resistance area is confirmed by the trendline extending down from December 2003 and resistance from broken support at 13.5 (red line).


Figure 2: UIS Daily, relative to SPX



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
Company: TDTrader.com
Address: Willem Geetsstraat 17
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Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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