A Potentially Bullish Flag For Millennium

12/27/05 08:22:51 AM

by Arthur Hill

After a big November 2005 surge, Millennium is consolidating below resistance and a breakout would reverse the long-term downtrend.

Security: MLNM
Position: Hold

On the weekly chart (Figure 1), Millennium Pharmaceuticals (MLNM) established support just below 8 and resistance just above 11. The stock tested support three times and resistance twice over the last 12 months. The latest resistance challenge occurred with a sharp advance in November (gray oval). However, volume was not that impressive and the stock fell short of a breakout. Volume is fuel, and it is apparent that more fuel is required to forge a breakout.

FIGURE 1: MILLENNIUM PHARMA, WEEKLY. MLNM tested support and resistance twice over the last 12 months.

Graphic provided by: WindowOnWallStreet.com.

Graphic provided by: MS QuoteCenter.

The current trend for MLNM is flat at best. The prior move (in 2004) was clearly down, and 2005 activity amounts to one big trading range. The resolution of this trading range will set the stage for the next big move. A break above the July 2005 high (11.19) would forge a 52-week high and usher in a long-term downtrend. A failure around 11 and a break below the June 2005 low (7.63) would usher in a downtrend.

FIGURE 2: MILLENNIUM PHARMA, DAILY. A potentially bullish setup can be seen here in MLNM, but volume patterns are not yet bullish.

Graphic provided by: MetaStock.

Graphic provided by: MS QuoteCenter.

A look at the daily chart (Figure 2) reveals a potentially bullish setup, but volume patterns are not bullish yet. The correction over the last few weeks looks like a falling flag (magenta trendlines). These are potentially bullish patterns that require confirmation with a breakout. I would like to see MLNM break the upper trendline, fill the December 7th gap and move above the early December high at 10.7 for bullish confirmation. In addition, I would like to see volume expand. Downside volume (red bars) has been outpacing upside volume (black bars) in December, and this needs to change for a breakout to have staying power.

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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A Potentially Bullish Flag For Millennium

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