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CH Robinson Hits Big Support Zone

11/09/07 02:01:50 PM
by Arthur Hill

With the long-term support at hand and oversold conditions prevailing, CH Robinson is at its make-or-break point.

Security:   CHRW
Position:   Hold

Figure 1 shows weekly prices and CH Robinson (CHRW) over the last 18 months. Resistance around 55-56 extends back to June 2006 and the stock challenge resistance at least five times. More recently, the stock formed a large trading range with support at 45-46 and resistance at 55-56.

FIGURE 1: CHRW. Resistance around 55-56 extends back to June 2006 and the stock challenges resistance here.
Graphic provided by: MetaStock.
 
This range looks like a rectangle and the long-term outlook depends on a break from this range. A move below key support (45) would be bearish and a move above key resistance (56) would be bullish. Choppy trading is the norm until there is a breach.

FIGURE 2: CHRW. The indicator became oversold (below 30) in March and late July (green ovals).
Graphic provided by: MetaStock.
 
With the stock in a trading range, a momentum oscillator can be used to identify overbought and oversold situations. In particular, the relative strength index (RSI) can be used to identify an oversold situation and a possible rebound off support. The indicator became oversold (below 30) in March and late July (green ovals). The first (RSI) surge from oversold levels failed (red arrows) and the indicator retreated after surpassing 50. The second surge above 50 stuck and the stock followed with a move toward resistance. See Figure 2.

FIGURE 3: CHRW. The current trend is down and the RSI moved into oversold territory recently.
Graphic provided by: MetaStock.
 
The current trend is down and the RSI moved into oversold territory this month. This tells me that it is too late to consider shorts, but it may be time to firm and mount a reversal. As with the prior signals, I will let the first bounce in the RSI pass and act on the second break above 50. It will likely take one to three weeks for a base and robust signal to materialize. See Figure 3.



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.

Title: Editor
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Date: 11/12/07Rank: 4Comment: 
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