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CANDLESTICK CHARTING


Big Shooting Star Spells Resistance For Newmont

12/15/05 08:09:34 AM
by Arthur Hill

A high-volume shooting star indicates a buying climax in Newmont, and this is likely to mark a peak for the next few weeks.

Security:   NEM
Position:   Hold

Newmont (NEM) gapped up on December 7 and surged above 52 on December 12. However, this surge failed to hold and the stock closed well off its low. The resulting candlestick formed a long upper shadow and small body (a shooting star). The combination of high volume and a failure to hold intraday gains exhausted the bulls, and some time is required to regroup. The bulls gave it all they had, but were turned back and a period of rest or correction is likely.

FIGURE 1: NEWMONT, DAILY. NEM gapped up on December 7 and surged on December 12. This surge failed to hold, however, and the stock closed well off its low.
Graphic provided by: MetaStock.
Graphic provided by: MS QuoteCenter.
 
The shooting star is a bearish candlestick reversal pattern that requires confirmation with further downside (Figure 1). Despite this shooting star, NEM is holding the December 7th gap, which is bullish as long as it holds. In addition, I have drawn a trendline extending up from December 15, and there is support from broken resistance at 48. The stock simply got ahead of itself and needs some time to work off these excesses.

As long as 48 holds, I would consider the correction to be a minor one and not be too concerned. However, a move below 48 would fill the gap, break the trendline, and exceed broken resistance. This would make the gap a bearish exhaustaion one and confirm the shooting star. An exhaustion gap, confirmed shooting star, and support break would tilt the balance of evidence in favor of the bears.



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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Date: 12/15/05Rank: 4Comment: 
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