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CANDLESTICK CHARTING


A Shooting Star Could Spell Trouble For Altera

02/15/07 02:32:00 PM
by Arthur Hill

Altera has held up pretty well over the last few weeks, but a shooting star and signs of distribution indicate that the stock is not as strong as it may seem.

Security:   ALTR
Position:   Hold

On the daily chart (Figure 1), ALTR remains in an uptrend and is hitting resistance from the November and January highs. It surged in October and broke falling flag resistance, but the move was short-lived as the stock moved into a trading range and formed a flat flag. There was a breakout attempt last week, but ALTR fell back below the breakout point and is again consolidating. Look for a move above 21 to trigger another breakout and call for a continuation of the utprend.

Graphic provided by: Telechart 2007.
 
The flag marks a big support zone and this is confirmed by the July trendline. A move below 19.2 would break the July trendline and support from the December–January lows. This would also forge a lower low and call for a reversal of the medium-term uptrend.

Graphic provided by: Telechart 2007.
 
Traders should keep an eye on the recent shooting star and weakness in the accumulation/distribution line (Figure 2). The shooting star forms with a long upper shadow (intraday high) and a small body at the low end of the range. The bulls were able to push prices higher intraday, but failed to hold these gains and the stock closed near its low. This is a bearish candlestick reversal pattern that requires confirmation. A move below 20 would confirm the pattern and increase the chances of a support break.

While the stock traded flat the last two months, the accumulation/distribution line moved sharply lower. This shows distribution within the range. Note how the accumulation/distribution line dropped sharply with the shooting star. This is because the close was near the low for the day and that reflects distribution. This indicator is pointing to further weakness and a confirmed shooting star would back this up.



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
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E-mail address: arthurh@tdtrader.com

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Date: 02/15/07Rank: 4Comment: 
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