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CHANNEL LINES


A 30-Minute Breakout For Pfizer

04/02/07 09:43:27 AM
by Arthur Hill

Pfizer broke channel resistance with good volume on the 30-minute chart, enough to reverse the short-term downtrend.

Security:   PFE
Position:   Accumulate

The 30-minute chart shown in Figure 1 covers the last 18 trading days, and analysis applies to the short-term trend. Because technical analysis is fractal, we can apply the same analysis techniques to different time frames. Analysis techniques are universal. This chart could easily be a daily, weekly, or even monthly chart. The only reason I know it's a 30-minute chart is because I created it and set the time frame.

The stock advanced sharply from March 14 to 21 and then declined over the last seven days. The decline formed a falling price channel and retraced around 62% of the prior advance. Both the retracement and the pattern are typical for corrections. The correction ended with a surge above the upper channel trendline and prior high. Prior to this breakout, the stock formed a string of lower lows and lower highs — hence the falling price channel. The breakout broke this string, and today's higher high is the first step toward a new uptrend. It would take a move below 25 to negate this breakout.

FIGURE 1: PFIZER, 30-MINUTE. Analysis techniques are universal. This chart could easily be daily, weekly, or monthly.
Graphic provided by: TC2000.com.
Graphic provided by: Telechart 2007.
 
Volume and momentum confirm the breakout. Volume is important on upside breakouts and Pfizer's volume surged to its highest level in over a week. These are 30-minute volume bars, and I overlaid a 50-period moving average. The surge in volume shows strong buying pressure, and this further validates the breakout. The relative strength index (RSI) also shows strong momentum with a positive divergence and break above 50. The indicator became short-term oversold on March 28 and formed a higher low. This show less downside momentum, and the surge above 50 puts the RSI back in bull mode.



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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Date: 04/06/07Rank: 4Comment: 
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