Shuffle Master Deals A Bad Hand

02/08/06 09:06:08 AM

by Arthur Hill

A moving average break and relative weakness spell lower prices for Shuffle Master.

Security: SHFL
Position: Sell

Shuffle Master (SHFL) was a top performer from 2000 to 2004, but upside momentum started waning in 2005, and currently, the stock is breaking down in 2006. The stock established support near 24 with a reaction low in April 2005, and the stock bounced off this area throughout 2005 (Figure 1). A trading range evolved in 2005 and the stock formed a triangle from August to December (magenta trendlines). The stock managed to hold around 24 the last few months, and the 100-week simple moving average (SMA) confirms this support area.

FIGURE 1: SHUFFLE MASTER. SHFL established support near 24 with a reaction low in April 2005. A trading range evolved in 2005 and the stock formed a triangle from August to December (magenta trendlines).

Graphic provided by: MetaStock.

The stock held support at 24 again in January but broke below 23 in February. This move broke the 100-week SMA and the lower triangle trendline and forged a 52-week low. These are all bearish developments that call for lower prices over the coming months. The first downside target is around 18-19, a level marked by the August 2004 low. This support area is also confirmed by a 50-62% retracement of the 2003–04 advance.

In addition to the bearish chart signals, Shuffle Master also shows relative weakness. The top indicator plots the price relative (SHLF divided by the Standard & Poor's 500). The line rises when the stock outperforms the S&P 500 and falls when it underperforms. The stock has been underperforming since February 2005, and the price relative moved to a new low recently. Fund managers like to avoid relatively weak stocks, and poor relative strength bodes ill.

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
Company:	TDTrader.com
Address:	Willem Geetsstraat 17
	Mechelen, B2800
Phone # for sales:	3215345465
Website:	www.tdtrader.com
E-mail address:	arthurh@tdtrader.com
Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!

Comments

Date:�02/08/06Rank:�4Comment:�

PRINT THIS ARTICLE

Request Information From Our Sponsors

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

Comments or Questions?	Article Usefulness
	5 (most useful) 4 3 2 1 (least useful)

MOVING AVERAGES

Shuffle Master Deals A Bad Hand

Comments

SUBSCRIBE TO OUR FREE EMAIL NEWSLETTER!

SUBSCRIBE TO OUR FREE
EMAIL NEWSLETTER!