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FLAGS AND PENNANTS


VIP Ready For A Bullish Rally

04/05/07 09:48:24 AM
by Chaitali Mohile

Vimpel Communications is ready to resume a bullish rally.

Security:   VIP
Position:   Buy

Vimpel Communications (VIP) has moved upward and then consolidated, forming a flag on its chart. The advance rally was from $82 to $97 and then consolidated in the narrow range. The breakout of a bullish flag & pennants formation was in the direction of the advance rally. In Figure 1, the relative strength index (RSI)(14) made higher lows, indicating a bullish rally. At 26, the average directional movement index (ADX)(14) shows a developing bullish trend.

FIGURE 1: VIP, DAILY. The flag & pennants breakout will give a new target of $112.
Graphic provided by: StockCharts.com.
 
The target on the flag & pennants formation was calculated by measuring the size of the flagpole. The advance rally forms the flagpole, so $97 - $82 (flagpole) ended up with $15. Adding $15 to $97, we get a handsome target of $112. Hence, traders can go long with the target.

FIGURE 2: VIP, WEEKLY. The ADX and the RSI made a price consolidation after the vertical move.
Graphic provided by: StockCharts.com.
 
Now let's look at the VIP weekly chart (Figure 2). The price is moving in the direction of the 50-day moving average. A small consolidation is seen in the price with a volatile move in the RSI (14) at the 70 level. Though the RSI is overbought, it can carry the bullish move further. The ADX (14) was highly overheated at 50, which led to a decline that was reflected with the price consolidation, but the ADX still shows a bullish trend.

Thus, traders can get a fresh buying opportunity on a breakout above $97. This breakout on heavy volume will reconfirm the strength of the rally that will lead to a new target of $112.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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