The Tide Is Turning At Tidewater

08/02/06 08:01:57 AM

by Arthur Hill

A recent gap off support with big volume and a strength in two key indicators point to higher prices for Tidewater.

Security: TDW
Position: Accumulate

FIGURE 1: TIDEWATER. TDW has found support around 42 twice in the last two months.

Graphic provided by: MetaStock.

First, let's look at the price chart (Figure 1). Tidewater (TDW) found support around 42 twice in the last two months. The second bounce off support occurred with a gap up, and this gap has held for six days. In addition, the stock moved higher over the last two days with above-average volume. This further reinforces the gap and support from the June and July low.

The moving average convergence/divergence (MACD) confirms strength with a positive divergence and signal line crossover. Technically, the stock moved below the June low in July. During this time frame, the MACD formed a higher low and a large positive divergence. This showed less downside momentum on the July decline. The subsequent higher low and signal line crossover in MACD act as the early bull signal. Further strength into positive territory would turn momentum fully bullish.

I am also using the Chaikin money flow (CMF) indicator to confirm price action and momentum. This indicator is volume-based and complements the price chart and momentum. CMF was negative in early June and then turned positive in early July. While the stock declined back below 45 in July, the CMF remained positive, suggesting the decline was corrective. Money flow was already positive, and the high-volume surge on August 1 makes it clear that volume is coming into the stock.

The bullish stars are all aligning for Tidewater. The gap, momentum, money flow, and volume all favor the bulls right now, and I expect a move to the May high. Failure to hold the gains of the last three days (44) would show weakness, and in that case, I would reevaluate this bullish prognosis.

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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