Texas Instruments Stalls Below Resistance

12/17/04 03:17:12 PM

by Arthur Hill

Texas Instruments has led a resurgent semiconductor group in September to October, but has run into stiff resistance since early November.

Security: TXN
Position: Hold

The overall pattern at work looks like a long decline followed by a rising price channel or wedge for a corrective advance. Note that the advance retraced around 50% of this decline and is meeting resistance from the May-June highs. This advance is considered corrective because the prior move (34 to18) was to new lows and a 50% retracement is normal. It would take a move above the May highs (key resistance) to consider a trend change.

There are signs that the corrective advance is ending and even reversing. First, the stock met resistance around 25-26 in early November and failed on numerous attempts to break out. Second, the stock gapped down on December 7, and this gap has yet to be filled. Third, -DI (minus directional movement) has moved above +DI (positive directional movement). These are the two directional indicators that are used in J. Welles Wilder's average directional movement index (ADX). They can also be used separately to identify directional changes. Note how -DI remained above +DI from April to August as the stock trended lower.

Figure 1: Texas Instruments

Graphic provided by: MetaStock.

Graphic provided by: Reuters Data.

Support at 23 holds the final piece to this potentially bearish puzzle, and the odds favor a break. But it ain't broken until it's broken. This support level is confirmed by the lower trendline of the rising price channel and support from broken resistance. A move below 23 would signal a continuation of the prior decline and the first target would be a test of the August low around 18.

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.

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Texas Instruments Stalls Below Resistance

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