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Liberty Global Faces Key Resistance04/28/06 10:14:59 AM
by Gary Grosschadl
Now under the pressure of two key moving averages, LBTYA looks vulnerable to further downside.
|Liberty Global is one of the largest cable television operators outside the United States, principally in Europe, Asia, and Latin America.|
|The weekly chart shown in Figure 1 shows a bullish rising channel, but two key moving averages (the 20- and 200-period exponential) paint a bleaker picture. When stocks come off a peak and then fall below their 20-period moving average (MA), I consider the possibility that a failure pattern may develop. This is a downleg characterized by a series of bear rallies failing at the 20-period MA. Do not trust the stock until it closes above this overhead resistance.|
|FIGURE 1: LIBERTY, WEEKLY. This chart hints that the bullish channel will have a downside test soon.|
|Graphic provided by: StockCharts.com.|
|What makes this more ominous is the fact that the stock is also under its key 200-period exponential moving average (EMA). Looking back on this chart, there is a history of multiple bounces off this line, leading me to conclude that once this line is violated, a change in trend may be under way.|
|We can also consider several indicators. At the top of the chart, we can see an overheated average directional movement index (ADX) line coming off a peak, which normally hints at a coming trend change. However, the directional movement indicators (DIs) have refused to cross after converging. This apparent failure to confirm the intended trend change (from bearish to bullish) hints at a renewal of bearish power. Below the chart, the MACD (moving average convergence/divergence) and the RSI (relative strength index) are not yet in agreement. The MACD shows a bullish cross of its signal line while the RSI is considered bearish, as it cannot rise above the key 50 level. They will eventually agree once the stock makes a more decisive move.|
|If LBTYA cannot close above its 200-day EMA, then at the very least, we can expect another test of the lower trendline, currently at $18.50. Should this fail, then two lower targets -- $15 and $11 -- come into play.|
Independent Canadian equities trader and technical analyst based in Peterborough
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