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by Arthur Hill
A high-volume surge and bearish candlestick reversal point to a blow-off top for American Express.
Position: Sell
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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RSI
A Blow-Off Top For American Express
09/22/05 11:47:47 AMby Arthur Hill
A high-volume surge and bearish candlestick reversal point to a blow-off top for American Express.
Position: Sell
| High volume on an advance is generally a bullish sign. However, it can also signal too much enthusiasm and lead to a top. American Express (AXP) surged over the last two weeks with good volume and formed a long white candlestick on the second-highest volume of the year (red arrow, Figure 1). This surge abruptly ended with two small black candlesticks and then a gap down. The pattern looks like a bearish harami. Moreover, the gap and long black candlestick confirm this pattern and point to further weakness. |
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| FIGURE 1: AMERICAN EXPRESS. AXP surged over the last two weeks with good volume and formed a long white candlestick on the second-highest volume of the year (red arrow). This surge abruptly ended with two small black candlesticks and then a gap down. The pattern looks like a bearish harami. Moreover, the gap and long black candlestick confirm this pattern and point to further weakness. |
| Graphic provided by: MetaStock. |
| Graphic provided by: Reuters Data. |
| |
| It is also interesting to note that volume was high when the stock declined over the last two days. A low-volume decline shows tepid selling pressure and would be more indicative of a mild correction or consolidation. This increase in selling pressure (volume) further validates the short-term reversal, and the next support area is around 55. |
| The relative strength index (RSI) also confirms the recent reversal. RSI moved above 70 (overbought) on September 12 and then formed a lower high. In the meantime, AXP formed a higher high with a close above 59 on September 16. The lower high in RSI and higher high in AXP formed a negative divergence (red line). RSI subsequently moved below its prior low at 54; this is an RSI sell signal. |
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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Date: 09/22/05Rank: 5Comment:
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