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SYMMETRICAL TRIANGLE


Novavax Breaks Higher

02/28/06 07:58:56 AM
by Gary Grosschadl

This specialty biopharmaceutical company leaps out of a consolidation pattern as it eyes previous resistance levels.

Security:   NVAX
Position:   Buy

It's been a long slide down on the weekly chart of Novavax (NVAX) since 2003 (Figure 1). Now, the bottom looks good as the first recognizable pattern forms in the shape of a symmetrical triangle. As the stock quickly rises off a bottom hammer candlestick, a period of consolidation is inevitable.

Typically, volume dries up in a consolidation period, which is aptly displayed. A very bullish candle on the week breaks convincingly above the triangle, albeit on modestly higher volume.

Three upside targets are suggested, all relating to former high-water marks punctuated with long upper tails or shadows. Triangle breaks do have a measured upside target. The maximum width of the formation (5 - 2.80 = 2.20) is applied to the breakout point (4.80 + 2.20 = $7). This will likely be formidable resistance, as it also relates to an earlier resistance level. An interim target could be found near the $6 level where another consolidation could occur or the advance rejected. A super bullish move could eventually ensue, leading to the $8.80 region.

FIGURE 1: NOVAVAX, WEEKLY. The bottom looks solid for NVAX.
Graphic provided by: StockCharts.com.
 
Several indicators are worthy of note. At the top of the chart, a strong trend is in place via a rising average directional moving index (ADX). When this line peaks and reverses, a retracement will follow. The indicators below the chart — the moving average convergence/divergence (MACD), the relative strength index (RSI), and the stochastics oscillator — are all in bullish territory. Note how well their earlier bullish (positive) divergences to price action accurately confirmed the bottom was in via the hammer candlestick.

NVAX has enough momentum to move forward higher. How it handles the first line of resistance will give clues to how robust this drive higher is. How far it goes before another consolidation, however, remains to be seen.



Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

Website: www.whatsonsale.ca/financial.html
E-mail address: gwg7@sympatico.ca

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Date: 02/28/06Rank: 5Comment: 
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