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Keeping An Eye On Avnet Inc.

02/02/05 07:56:19 AM
by Koos van der Merwe

The chart suggests keeping an eye on Avnet Inc.

Security:   AVT
Position:   Buy

Avnet Inc. (AVT) is one of the world's largest industrial distributors of electronic components and computer products. Figure 1 is a chart of AVT. Just with a glance, you can see that technically, it has given a buy signal. Consider these factors:

a. The Friday, January 28th price rose on a gap, and on strong volume.
b. The moving average convergence/divergence (MACD) indicator is turning, and although it is a trend-following indicator, the MACD (blue histogram) has moved above the nine-period exponential moving average (EMA) (red dotted line).
c. The stochastic oscillator is starting to turn, suggesting that it could soon give a buy signal (when it breaks above the 20 line).
d. The commodity channel index (CCI) has given a buy signal by rising above the 100 horizontal line.

The trendline, however, is a concern, because the pattern is a trumpet shape -- a broadening formation -- which suggests an unreliable trend, so caution would be key.

Because of the gap, we could expect a retracement to fill the gap. Once this has been done, we could buy and hold the stock with a possible target of $20.69, the upper trendline. But because of the trumpet formation, we should be cautious. The resistance at $18.55 could be a factor.

Figure 1: Avnet. A good look at this stock suggests keeping an eye on it.
Graphic provided by: MetaStock.
I would buy the stock at current prices, with an immediate target of $18.55. Should the price break decisively through this level, my target would rise to $20.69.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Date: 02/03/05Rank: 3Comment: 
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