Inco Breaking Out To New Highs

01/26/06 11:44:08 AM

by Arthur Hill

Inco's recent breakout on big volume argues for continued strength over the next few months.

Security: N
Position: Accumulate

After a surge in 2003, Inco (N) corrected in early 2004 and then began a long zigzag higher. The price action since the May low (Figure 1, gray arrow) has not been exciting, but it has been steady. The stock forged higher highs and higher lows as it slowly climbed from below 30 to above 45. A rising price channel has taken shape, and the long-term trend is clearly up as long as the lower trendline holds.

FIGURE 1: INCO. After a 2003 surge, N corrected in early 2004 and then began to climb.

Graphic provided by: MetaStock.

Graphic provided by: MS QuoteCenter.

Turning to a shorter time frame, we can see a nice move above 45 last year and then a consolidation over the past several weeks (Figure 2). This consolidation looks like a triangle, and the surge above the upper trendline signals a continuation of the October–December advance.

FIGURE 2: INCO. There was a move above 45 last year, and then a consolidation over the past few weeks. This consolidation looks like a triangle and the move above the upper trendline signals a continuation of the October–December advance.

Graphic provided by: MetaStock.

Graphic provided by: MS QuoteCenter.

Volume indications validate the breakout. Even though the stock has been consolidating the last several weeks, the accumulation-distribution line continued moving higher. This indicator recorded a new high recently, and this affirms current buying pressure. In addition, the most recent surge over the last three days occurred on expanding volume. This validates strength and argues for even higher prices.

The triangle target would be to around 51. The width of the triangle is added to the breakout. However, judging from the strength of the breakout and volume behind the move, I would return to the weekly chart for a higher target. The upper trendline of the rising price channel extends to the mid-50s by June, and this price objective looks entirely possible.

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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Inco Breaking Out To New Highs

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