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by Arthur Hill
A high-volume breakout opens the door to higher prices for PMC-Sierra.
Position: Accumulate
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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BREAKOUTS
PMC-Sierra Surges Above Resistance
11/07/06 08:07:54 AMby Arthur Hill
A high-volume breakout opens the door to higher prices for PMC-Sierra.
Position: Accumulate
| PMC-Sierra (PMCS) has been quite volatile the last few months. The stock gapped down in July, recovered in August, gapped down in September, and recovered in October. The second gap-recover sequence was smaller, but the ability to recover after a gap down shows resilience. |
| The stock firmed after the late September gap and found support around the 50-day moving average (Figure 1, gray box). There was a tight consolidation for two to three weeks and then a surge to 7. The stock hit resistance at 7 for the fourth time in three months and consolidated into early November. As it turned out, 7 was the level to beat and PMCS broke through resistance with good volume this week. |
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| FIGURE 1: PMC-SIERRA, DAILY. PMCS firmed after the late September gap and found support around the 50-day moving average (gray box). |
| Graphic provided by: TC2000.com. |
| Graphic provided by: Telechart 2007. |
| |
| The pattern from mid-August to early November looks like an inverse head & shoulders. After an advance, an inverse head & shoulders is a continuation pattern. It also requires a break above neckline resistance for confirmation and volume plays an important role. The surge above 7 broke neckline resistance and volume was above average. In addition, note that the on-balance volume (OBV) broke above its October high. |
| High volume reinforces the breakout and the next resistance zone is around 9. This will be the upside target as long as the stock shows strength. A strong stock should hold its breakout and a move back below 7 would be negative. I still see a lot of support around 6, however, and would not turn bearish unless PMCS broke the October low (5.79). |
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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Date: 11/08/06Rank: 4Comment:
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