Real Networks Readies For A Real Breakout

02/09/05 10:14:49 AM

by Arthur Hill

The recent gap by Real Networks is certainly positive, but one more hurdle needs to be cleared.

Security: RNWK
Position: Accumulate

The recent gap by Real Networks, while positive, needs to clear one more hurdle before turning fully bullish. There are a number of positive chart features. First, the stock broke resistance at 5 with a surge in May 2003. Second, this broken resistance area turned into a support zone that held in December 2003 and September 2004. Third, the decline formed a falling wedge, which is typical for a correction (blue trendlines). And finally, RNWK broke above the upper trendline of the falling wedge with a high-volume surge in December 2004.

Despite recent strength, the stock is still trading below a major resistance level just above 7. This resistance area extends back to January 2004 and there were no fewer than four failed breakout attempts. The last failure occurred in December 2004 with a reaction high at 7.27. There is a ton of supply just above 7, and Real Networks needs to exorcise this resistance level to turn fully bullish.

Figure 1: Real Networks. The recent gap is positive, but one more hurdle needs to be cleared before turning fully bullish.

Graphic provided by: MetaStock.

Graphic provided by: Reuters Data.

The high-volume gap is a start. Based on positive press, the stock gapped higher on the highest volume in years. The gap solidifies support around 5.5 and should be considered bullish as long as it holds. A move below 6 would fill the gap, and further weakness below 5.4 would indicate a total failure. As long as the gap holds, the odds favor a big resistance breakout.

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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Real Networks Readies For A Real Breakout

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