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CANDLESTICK CHARTING


MasterCard Firms At Support

01/22/08 10:33:33 AM
by Arthur Hill

After a decline in the first two weeks of January, MasterCard became oversold and then firmed at support. Look for a range breakout to trigger a rally.

Security:   MA
Position:   Accumulate

Figure 1 shows a broken resistance gap turn to support, while Figure 2 shows that the stock firmed over the last four days (blue circle). These candlesticks have small real bodies and this shows indecision. The open and the close formed the body. A small body indicates little change (indecision) from the open to the close. In addition, an inverted hammer formed three days ago and a spinning top formed two days ago. The stock is clearly trying to firm. A move above 182 would break the four-day range and call for a rally off support. Failure to hold this breakout and a move below the range lows would be bearish.

FIGURE 1: MA, DAILY. Here, the chart shows broken resistance and a gap turn support.
Graphic provided by: TeleChart2007.
 
A second signal can be generated using the relative strength index (RSI). The indicator became oversold with the move below 30 and remains oversold (blue box). I would consider MA both oversold and bearish as long as the RSI holds below 30. Remember, a stock can become oversold and remain oversold if the downtrend continues. A move above 30 would end oversold conditions and pave the way for a bounce in the stock.

FIGURE 2: MA, DAILY. The stock firmed over the last four days (blue circle).
Graphic provided by: TeleChart2007.
 



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
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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