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GAPS

A Breakout For MMC

01/07/08 08:50:12 AM
by Arthur Hill

Marsh & McLennan bucked the market trend with a breakout over the last two weeks, and good relative strength points to further gains in the weeks ahead.

Security:   MMC
Position:   Accumulate

Figure 1 shows weekly prices and a large trading range for Marsh & McLennan (MMC). The stock bounced off support around 24–25 at least three times since October 2005. In addition, the stock met resistance between 32 and 35 four times over the last two years. The stock is once again trying to bounce off range support, and this could foreshadow a move back to range resistance.

FIGURE 1: MMC, WEEKLY. Here's a large trading range for Marsh & McLennan, with the stock bouncing off support aorund 24 to 25 at least three times since October 2005.
Graphic provided by: TeleChart2007.
 
Figure 2 shows a breakout on the daily chart with strength in some key indicators. MMC met resistance at 26 in November and December. The stock broke this resistance level with a gap up and high-volume surge in late December. Note that the breakout also occurred with a gap and the stock broke the 50-day moving average. The breakout is solid as long as broken resistance holds at 26. A move below this level would call for a reassessment.

FIGURE 2: MMC, DAILY. Here's a breakout with strength in some key indicators.
Graphic provided by: TeleChart2007.
 
On-balance volume (OBV) and relative strength validate the breakout. The advance over the last two weeks occurred with above-average volume. This propelled OBV to new highs over the last two weeks. Buying pressure is strong. The price relative is shown in the bottom indicator window. This compares the performance of MMC against the Standard & Poor's 500 ETF (SPY). The price relative broke resistance over the last few weeks, and this shows that MMC is outperforming SPY. A gap breakout, strong volume, and relative strength are bullish for MMC.


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
Company: TDTrader.com
Address: Willem Geetsstraat 17
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Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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