Time Warner Coming Up On Key Resistance

11/16/04 07:46:40 AM

by Kevin Hopson

Though a significant resistance area is approaching, Time Warner may have the power to break through.

Security: TWX
Position: Hold

Time Warner, Inc. (TWX), has had a nice run the past three months, as the stock has appreciated roughly 13% since its August low. However, Time Warner is now coming up on a key resistance area, which could act as a reversal point for the stock. For example, note how the stock has been rallying in the lower half of the blue pitchfork since mid-August. The blue median line, which the stock has failed to overcome the last three months, is now converging around the $17.60 level.

In addition, note how Time Warner recently broke out of the bottom half of the black pitchfork. This means the top black parallel line ($17.80) should be the next point of resistance. Also coming into play around this level is June's high ($17.90) and August's uptrend line ($17.50), which are both illustrated by the dotted red lines. If that is not enough, the 61.8% retracement level ($17.82) from the January to August decline has converged here. As a result, the $17.50 to $17.90 range will likely act as significant resistance for Time Warner in the near term.

Figure 1: Time Warner

Graphic provided by: StockCharts.com.

However, if the stock can overcome this barrier, there is a lot of potential buying pressure to push prices higher. More specifically, short interest for Time Warner was 67.1 million shares -- or roughly 5.8 times the stock's average daily volume -- as of October 8. In addition, a likely upside target would be $19.30, the site of this year's (January's) high and the top blue parallel line. As a result, if Time Warner can take out resistance in the $17.50 to $17.90 range, I would look to go long. In the meantime, I would hold for further developments.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.