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Waning Momentum For Motorola

01/04/06 09:19:26 AM
by Arthur Hill

A bearish reversal pattern and less upside momentum mean that traders should watch key support for Motorola.

Security:   MOT
Position:   Hold

Motorola (MOT) was a standout performer in 2005 and finished the year near its 52-week high (25). However, The relative strength index (RSI) did not follow suit when the stock moved to a new 52-week high in late November (Figure 1). RSI failed to exceed its September high and formed a negative divergence over the last few months. Upside momentum on the latest peak was less than before, and this could come back to haunt the bulls.

FIGURE 1: MOTOROLA. MOT finished 2005 near its 52-week high, but RSI did not follow suit.
Graphic provided by: MetaStock.
Graphic provided by: MS QuoteCenter.
 
The stock is holding support for now. The April trendline and November-December lows mark support just above 22 (Figure 2). Despite waning momentum, the stock formed a higher high in November and the overall trend is up. A move below 22 would break the November-December lows and the April trendline. This would break the upward trajectory established by the trendline and call into question the strength of the uptrend.

FIGURE 2: MOTOROLA. In addition to waning momentum, MOT formed a head & shoulders pattern over the last two months.
Graphic provided by: MetaStock.
Graphic provided by: MS QuoteCenter.
 
In addition to waning momentum, MOT formed a head & shoulders pattern over the last two months. The left shoulder formed in early November, the head in late November, and the right shoulder in late December. The neckline (green) slopes down and marks support just above 22. I will be focusing on the consolidation over the last three weeks (right shoulder). A move below the consolidation lows would confirm the head & shoulders and argue for lower prices. Should support hold, a move above the consolidation highs would be bullish and argue for higher prices.



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.

Title: Editor
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Address: Willem Geetsstraat 17
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Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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Date: 01/05/06Rank: 4Comment: 
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