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CONSOLID FORMATION


Alaska Air Consolidates At Trendline Support

02/07/06 08:09:16 AM
by Arthur Hill

After a hard landing in January, Alaska Air managed to firm at trendline support, and the current consolidation holds the key to the next move.

Security:   ALK
Position:   Hold

On the weekly chart (Figure 1), the trend for Alaska Air (ALK) remains up. The stock has been moving higher since October 2002 and has been in a rising price channel since April 2005. The higher highs and higher lows establish a clear upward bias (magenta trendlines).

FIGURE 1: ALASKA AIR, WEEKLY. The trend is testing the lower channel boundary currently for ALK.
Graphic provided by: MetaStock.
 
After recording a higher high in December, however, the stock swooned lower in January and is testing the lower channel trendline. This decline was quite sharp, but the stock is still holding above its prior low and keeping the uptrend alive. A move below the October low would break channel support and the prior low. This would be enough to reverse the uptrend on the weekly chart.

FIGURE 2: ALASKA AIR, DAILY. ALK appears to have been forming a rising flag over the past few weeks.
Graphic provided by: MetaStock.
 
On the daily chart (Figure 2), my focus turns to the consolidation over the last few weeks. We already know that the consolidation lows correspond with the lower trendline of the rising price channel on the weekly chart. This makes consolidation support all the more important. The pattern over the last few weeks looks like a rising flag, which is a bearish consolidation. A break below the late January low (at 30) would signal a continuation lower and project a move to the mid-20s. This would break the October low and turn the bigger trend bearish.

As long as consolidation support holds, the bulls have a fighting chance. However, I would wait for some sort of breakout for confirmation. The stock gapped higher on January 31, but stalled over the following four days. To revive the bulls, I would like to see some follow-through to this gap and a move above the February 1st high.



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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E-mail address: arthurh@tdtrader.com

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Date: 02/07/06Rank: 4Comment: 
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