Kodak Bucks Market Weakness

02/04/05 08:28:24 AM

by Arthur Hill

January has been a difficult month for the broader market, but Eastman Kodak managed to find some buyers and forge a breakout.

Security: EK
Position: Buy

The trend for Eastman Kodak (EK) is clearly up over the last 18 months, and the recent breakout signals a continuation of that uptrend. The price action from January 3, 2004, to September 4 looks like one big base (gray oval) and the stock broke above resistance with a surge to 35. This move broke above the September 9th trendline and September 4th high. More important, the advance occurred with high volume (gray arrows), and this validates the breakout.

The breakout was immediately followed by a pullback and consolidation. Broken trendline resistance turned into support around 29, and the stock formed a triangle over the last five months. In addition, volume declined as the stock consolidated above 30 (blue arrows). This is normal for a consolidation as activity slows and prices digest the prior move.

Figure 1: Eastman Kodak. The trend for EK is clearly up over the last 18 months, and the recent breakout signals a continuation of that uptrend.

Graphic provided by: MetaStock.

Graphic provided by: Reuters Data.

With an advance in January 2005, the stock broke above the upper trendline and moved to a three-month high. In addition, volume surged and on-balance volume broke out to a new high. This volume indicator adds volume on up weeks and subtracts volume on down weeks. The new high shows that buying pressure is strong and reinforces the breakout.

As long as the breakout and the January low hold, the upside target is around 41 over the next few months. The first target is based on an extension of the triangle. The gray trendline was drawn parallel to the lower triangle trendline and extends above 40 in April and May 2005. This target is confirmed by resistance from the January 3rd high around 41.

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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Kodak Bucks Market Weakness

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