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TECHNICAL ANALYSIS


Is Entergy Corp. Setting Up For A Move?

03/07/05 07:40:15 AM
by Kevin Hopson

Support and resistance are converging, but the longer-term trend may dictate which way prices break.

Security:   ETR
Position:   N/A

Entergy Corp. (ETR) broke out of a bullish trading range in late January 2005, as illustrated by the dotted purple lines in Figure 1. This breakout indicates a potential upside target of $75.00 to $78.50. I calculated this target by taking the number of times that prices tested the top channel line in alternate sequence prior to breaking out (3), multiplying this figure by the width of the trading range ($68.00-$64.50=$3.50) and then adding this amount ($3.50*3=$10.50) to the bottom ($64.50+$10.50=$75.00) and top ($68.00+$10.50=$78.50) channel lines.

Note that during the late January to early February rally, prices only made their way up to the $71.50 level. As a result, Entergy appears to have additional upside potential from here. However, the stock will have to overcome a key resistance level if the short-term downtrend is going to reverse. More specifically, see how prices have been consolidating in the upper half of the blue pitchfork since the February high. Over the past few days, the stock has been finding support along its 10-day and 20-day exponential moving averages (EMAs), as well as the bottom parallel line of the black pitchfork. On the other hand, February's downtrend line (top blue parallel line) and a multiple daily top (dotted red line) are acting as resistance around the $70.50 level. If Entergy can break resistance here, the stock should look to rally again.

Figure 1: Entergy. ETR broke out of a bullish trading range in late January 2005, as illustrated by the dotted purple lines. This breakout indicates a potential upside target of $75.00 to $78.50.
Graphic provided by: StockCharts.com.
 
In the meantime, market sentiment toward the stock continues to be negative. For example, short interest as of February 8 was 4.13 million shares, which equates to a short interest ratio of 4.30x based on the stock's average daily volume. In addition, 13 of the 19 analysts that cover the company currently have a hold rating on the stock. As a result, there is a lot of potential buying pressure to push prices higher, especially if Entergy takes out key resistance at the $70.50 level.



Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
E-mail address: hopson_1@yahoo.com

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Date: 03/07/05Rank: 3Comment: 
Date: 03/08/05Rank: 3Comment: 
Date: 03/08/05Rank: Comment: dear kevin, i find your use of andrew s pitchfork very usefull. i had written to you some time back and you had sent me a file regarding how one should use AP. can you recommend any book that deals with andrew s pitchfork in detail. would appreciate a response thanx in advance rgds sekhar krishnan email: esskay@vsnl.com
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