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


Dow Chemical Testing Key Support

01/12/05 04:00:41 PM
by Arthur Hill

Dow Chemical led the materials sector higher from mid-August to early December, but a double top is taking shape with signs of distribution.

Security:   DOW
Position:   Hold

Dow Chemical met resistance just above 51 in early December and again in late December. The two reaction highs form a sizable double top that would be confirmed with a support break at 47. Support at 47 is clearly marked by the November 4th gap and December 12th reaction low (green arrows). A break of this level would project further weakness to around 43 (51 - 47 = 4, 47 - 4 = 43).

The right portion of the pattern shows a sharp decline to support and then a consolidation over the last few days. This consolidation looks like a flag, which is typically a continuation pattern. The prior move was down and a move below the flag low (47.50) would signal a continuation of the late December/early January decline. This would also foreshadow a support break at 47 and confirm the double top.

Figure 1: Dow Chemical. The bearish setup is there, but what are the odds of a breakdown? The accumulation/distribution line, which measures buying and selling pressure, already confirmed its double top and suggests a good chance of a support break at 47.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
The bearish setup is there, but what are the odds of a breakdown? The accumulation/distribution line, which measures buying and selling pressure, already confirmed its double top and suggests a good chance of a support break at 47. Even though the peaks do not exactly match up with the double top in Dow, the accumulation/distribution line clearly shows two reaction highs (red arrows) and a support break (gray arrow). More important, this indicator has already confirmed its double top and shows a serious increase in selling pressure. Volume often leads price, and this indicator is forecasting more weakness.



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: 01/12/05Rank: 4Comment: 
Date: 02/01/05Rank: 4Comment: 
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.