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by Arthur Hill
After forming an island reversal on high volume, Amgen looks poised to break resistance and head higher.
Position: Accumulate
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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ISLAND REVERSAL
An Island Reversal For Amgen
01/30/08 03:51:40 PMby Arthur Hill
After forming an island reversal on high volume, Amgen looks poised to break resistance and head higher.
Position: Accumulate
| Figure 1 shows Amgen (AMGN) over the last five months, and it is not a pretty sight. The stock declined sharply in November–December and then gapped down in January. AMGN actually forged a new low in mid-January but bounced back with a long white candlestick and gap. This up gap produced an island reversal and the stock then consolidated at resistance from the January highs. |
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| FIGURE 1: AMGN, DAILY. Here's Amgen over the last five months. |
| Graphic provided by: TeleChart2007. |
| |
| A bullish island reversal forms with a gap down, short consolidation, and a gap up. The two gaps create an island of prices (the consolidation) that strand short positions with losses. The high-volume gap further validates the reversal and a break above resistance at 49 would open the door to higher prices. |
| Figure 2, the weekly chart, confirms resistance at 49 and also shows the potential for a weekly outside reversal. AMGN broke support at 49 in December and broken support turns into resistance. The stock has been below this resistance break most of the last five weeks. |
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| FIGURE 2: AMGN, WEEKLY. Resistance is confirmed at 49 and also shows the potential for a weekly outside reversal. |
| Graphic provided by: TeleChart2007. |
| |
| A long white candlestick is taking shape this week, and a close above 49 would forge a weekly outside reversal. This would also recoup the support break from late December. A breakout at 49 would target a move to the next resistance level around 58–59. This resistance area stems from the June and October highs. |
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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Date: 01/31/08Rank: 2Comment:
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