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Dell Inc. Finds Major Support

04/30/07 09:45:31 AM
by Gary Grosschadl

When a previously faltering stock manages to once again find support above its 200-day moving average, it's a bullish sign.

Security:   DELL
Position:   Hold

Since December 2006, this stock had a 20% decline to bottom near $22. Recently, it popped above its 20-day exponential moving average (EMA), and now this level has been successfully tested. This paves the way for further upside.

Several indicators are examined. At the top of Figure 1, the elements of the directional movement indicator (DMI) are considered. A strong bullish trend is evidenced when the average directional movement indicator (ADX) rises above 20–25. With the ADX currently at 25.23 and the directional indicators (+DI and -DI) positioned on either side, further bullishness should develop.

FIGURE 1: DELL, DAILY. The Dell stock is bouncing off support.
Graphic provided by:
Below Figure 1, several indicators are showing similar traits in that they all show a high bullish turn. The moving average convergence/divergence (MACD) shows an apparent bounce off its signal line while the relative strength indicator (RSI) and the stochastic oscillator are showing high bullish turns as well. This bodes well for likely continued upside.

The most obvious upside target is the target zone between $27.50 to $28. Look for either a reversal or another consolidation period when this area of previous resistance is met. This is bound to be a trading target for those short-term traders already onboard. This does not preclude further gains, but this would have to be fueled with high trading volume to convince new bulls to join. A surprise close below the current 200-day EMA negates these bullish considerations and the stock would likely fall lower to test previous support near $22.50 or just below $22.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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