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CANDLESTICK CHARTING


Pfizer Pfinding It Tough

06/27/05 09:37:30 AM
by Arthur Hill

After being plagued by drug problems in 2004, Pfizer rebounded throughout 2005. However, bearish candlesticks and waning momentum suggest an end to the current rally.

Security:   PFE
Position:   Sell

On the price chart (Figure 1), PFE formed a rising wedge from February to June. These are typically bearish patterns, but the bulls deserve some respect as long as the lower trendline holds. After all, the lower trendline is built on rising lows, and this shows buying pressure. A move below the lower trendline and June low would turn the trend bearish with the first downside target around 24 (the February low).

Figure 1: PFE. Pfizer shows a rising wedge from February to June.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
Despite the rising lows, the stock is meeting resistance from its May high around 29, and the relative strength index (RSI) formed a negative divergence. The May-June highs are roughly equal, but RSI formed a lower high and upside momentum is not what it used to be. In addition, note that RSI broke the green trendline extending up from February. Momentum had been steadily improving until this break.

Figure 2: Bearish candlesticks. PFE formed a hanging man and a shooting star on consecutive days.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
Not only is momentum waning, but bearish candlesticks formed with the recent high. The stock formed a hanging man on June 22 and a shooting star on June 23 (Figure 2). Both are bearish candlestick reversals that require confirmation with further weakness. A close below the hanging man low would be enough to confirm these candlesticks. The stock declined immediately after the shooting star on above-average volume, and this shows a significant increase in selling pressure. Pfizer needs to overcome this increased selling pressure, with a move above the shooting star high to negate this bearish prognosis.



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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