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BREAKOUTS


A Breakout For COCO

06/06/07 09:25:10 AM
by Arthur Hill

After consolidating for a few months, Corinthian Colleges is breaking resistance, and signs of accumulation point to further gains.

Security:   COCO
Position:   Accumulate

In Figure 1, Corinthian Colleges (COCO) moved above 14 and then began a consolidation phase. The stock hit resistance at 14.50 in February, March, April, and May. COCO pulled back after each resistance test and found support around 13.35–13.50 from March to May. This range held the stock in check for around three months, and the breakout at 14.50 is a victory for the bulls.

The break above 14.50 signals a continuation of the prior advance (11.50–14.50), and the next target is around 17. The prior advance was three points (the flagpole) and a similar advance from the consolidation lows would extend to around 16.50 (13.50 + 3 = 16.50). There is also resistance around 17 from the June 2005 high, and I am marking a target zone around 16.50–17.

FIGURE 1: COCO, DAILY. Corinthian Colleges moved above 14 and then began a consolidation phase.
Graphic provided by: Telechart 2007.
 
The accumulation/distribution line shows steady buying pressure. COCO traded flat during April and May, but the accumulation/distribution line moved higher from early April until the end of May. This advance was capped with a break above the prior highs, and the breakout confirms the breakout in COCO.

The breakout is in force until proven otherwise. A strong breakout should hold, and broken resistance at 13.50 becomes the first support level for a test. A move back below 13.50 would question bullish resolve and call for a reassessment. I would not turn bearish because there is still a lot of support around 13.50–14.50 from the consolidation. However, a break below consolidation support at 13.50 would be very bearish.



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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