Fiserve Has A Mind Of Its Own

04/26/05 07:51:42 AM

by Arthur Hill

While the Nasdaq wallows near its lows for the year, Fiserve (FSIV) is breaking resistance barriers on good volume.

Security: FISV
Position: Buy

While the Nasdaq wallows, Fiserve (FSIV) is breaking resistance barriers on good volume. The price chart for FSIV shows an inverted head & shoulders pattern with neckline resistance around 41 (Figure 1). The head formed in August 2004 and right shoulder in February 2005. The left shoulder is elongated and formed from July 2003 to June 2004. The long left shoulder reinforces resistance at 41 and the stock was turned back at this level at least five times since June 2003. The breakout is a major victory for the bulls and opens the door to higher prices.

Volume confirms strength. The August advance began with low volume, but volume expanded as the stock moved above 35 (blue arrow). FSIV met resistance at 41 and pulled back in January and February. Another run at resistance began in March and the stock broke through with the highest weekly volume in a year (April 2004). Volume is fuel, and this breakout clearly has the fuel required for further gains.

Figure 1: FSIV. While the Nasdaq wallows, Fiserve is breaking resistance barriers on good volume. The price chart shows an inverted head & shoulders pattern with neckline resistance around 41.

Graphic provided by: MetaStock.

Graphic provided by: Reuters Data.

Three bullish items are in place and the upside target is around 50. First, the stock broke neckline resistance at 41. Second, volume validated the breakout. Third, the stock shows good relative strength as the price relative broke to a new 52-week high (green arrows). The length of the pattern (head to neckline) is added to the breakout for an upside target (41 - 32 = 9, 41 + 9 = 50). As long as the blue trendline extending up from 22.50 holds, the uptrend is firmly in place.

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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HEAD & SHOULDERS

Fiserve Has A Mind Of Its Own

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