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

ACCUM./DIST. CHAIKIN


Buying Pressure Wanes On Qlogic Advance

12/14/04 08:26:57 AM
by Arthur Hill

After a marvelous run since mid-August, Qlogic shows signs of fatigue and a bearish pattern is emerging.

Security:   QLGC
Position:   Sell

The advance over the last few months traced out a rising wedge for Qlogic (QLGC). Even though these are typically bearish patterns, it would be wise to respect the current uptrend as long as the lower trendline holds. A move below the lower trendline and late November lows (33.87) would confirm other bearish indications and argue for a significant decline.

The first bearish indication is weak Chaikin money flow. This indicator measures the accumulation (buying pressure) or distribution (selling pressure) over a period of time. The current indicator is set at 21 days, which covers about a month. While the stock advanced to new highs in November and early December, Chaikin money flow remained well below its September and November highs. Buying pressure has not kept pace with price action. This has created a large negative divergence, and a move into negative territory would move the indicator from weak buying pressure to actual selling pressure.

Figure 1: Chaikin money flow, QLGC. The first bearish indication for Qlogic is weak Chaikin money flow.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
The second bearish indication is a large bearish engulfing pattern (red circle). This is a bearish candlestick reversal that requires confirmation. The open of the black candlestick is above the prior close and the close is below the prior open. The result is a day when the bulls started strong, but the bears took and won the day. Further weakness with a move below the late November low (33.87) would confirm this pattern. At the very least, it would solidify resistance around 39. At most, it would signal a reversal that could evolve into a decline back to the upper 20s.



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
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


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

Comments

Date: 12/14/04Rank: 3Comment: 
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.