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Ballard Power Systems Struggles With Bottom

09/28/07 09:09:00 AM
by Gary Grosschadl

Over the last four months this alternative energy play has tested a bottom three times. Is this third time charmed?

Security:   BLD.TO
Position:   Buy

Ballard Power Systems (BLD), which was originally founded as Ballard Research, is one of the larger companies developing fuel cell technology and has a hydrogen-powered bus running in Vancouver, British Columbia.

This daily chart paints a rather painful picture of a stock trying to establish a bottom (Figure 1). Although the symmetry is not very good, we can discern that a possible triple bottom is in the making. Several indications lend some credence to this speculation.

FIGURE 1: BLD, DAILY. This chart hints at a thrust upward toward overhead resistance.
Graphic provided by:
The latest bottom attempt shows a candlestick pattern called a "tweezer" bottom. The long matching tails give this tweezer appearance. This can signal a bottom. The subsequent trading action supports this via a large bullish candlestick closing above the nearby overhead resistance of the 50-day exponential moving average (EMA). In addition, the increased volume signal over the past week of trading shows bullish conviction.

Several displayed indicators under the chart show an important development via positive divergences. Multiple divergences are often a harbinger of a coming move. Note the slope of these indicators rising while the stock price has been dragging bottom.
The moving average convergence/divergence (MACD), the relative strength index (RSI), and the stochastic oscillator all hint at a move off the bottom of the chart. Looking at the Chaikin money flow indicator (CMF), we see a shift to bullish buying power. The previous time this happened was last June, when the stock catapulted from $4.40 to near $6.

Should a tradable upthrust develop, an aggressive trader could target a zone between $5.55 and $6. This zone contains the overhead 200-day EMA, currently at 5.64, and previous resistance levels of 5.55 and near $6. For a better longer-term move to develop, we would have to see the stock find support from the always important 200-day EMA. Until that happens, speculative traders will most likely take the money and run in the surmised profit-taking zone of $5.60 to $6.

Gary Grosschadl

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

E-mail address:

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