A Breakout Attempt For The CRB

06/25/07 02:54:29 PM

by Arthur Hill

The CRB Index broke daily chart resistance but failed at weekly resistance, and the large trading range remains.

Security: $CRB
Position: Hold

On the daily chart (Figure 1), the CRB Index worked its way lower from mid-April until mid-June and then surged above resistance. The pattern over the last few months looks like a falling wedge and the index found support near the May lows. There were three bounces off support and the third led to a breakout on the daily chart (1,2,3). The index exceeded the upper trendline of the rising wedge and moved above its May high. This breakout looked bullish, but the index came crashing back through with a sharp decline over the last four days.

FIGURE 1: CRB INDEX, DAILY. The index worked its way lower from mid-April until mid-June and then surged above resistance.

Graphic provided by: Telechart 2007.

Turning to the weekly chart (Figure 2), we can get some long-term perspective and an idea of why the breakout on the daily chart failed. Even though the index moved above its April and May highs, there was also resistance around 322–323 from the November 2006 high. This resistance level with just a few points above the April–May highs needs to be taken into consideration. Last week's sharp pullback confirms resistance from the November high, and I would now mark a resistance zone at 317–323 (blue box).

FIGURE 2: CRB INDEX, WEEKLY. We can get some long-term perspective and an idea of why the breakout on the daily chart failed.

Graphic provided by: Telechart 2007.

Despite the failed breakout on the daily chart, the outlook for the CRB Index is not bearish just yet and the current trading range holds the key to the next signal. Back on Figure 1, the 50-day moved above the 200-day and this is long-term positive. On Figure 2, the index formed a large falling wedge, found support near the 200-week moving average in January, and broke wedge resistance earlier this year. The index then consolidated after this surge and a break above consolidation resistance would be long-term bullish. Of course, a failure at resistance and a break below consolidation support would be long-term 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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A Breakout Attempt For The CRB

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