Relative Weakness For Juniper

04/04/08 08:54:51 AM

by Arthur Hill

Juniper failed to bounce with the rest of the market in March, and a bearish head & shoulders pattern looks most ominous.

Security: JNPR
Position: Sell

On the long-term chart (Figure 1), Juniper (JNPR) is trending lower within a falling price channel. The stock peaked in October and then zigzagged lower over the last six months. JNPR is currently trading closer to the lower trendline of the channel and found some support over the last three months, but the overall trend is clearly down.

FIGURE 1: JNPR, DAILY. On the long-term chart, Juniper is trending lower within a falling price channel.

Graphic provided by: TeleChart2007.

Two key moving averages confirm the current downtrend. The 50-day simple moving average (SMA) moved below the 200-day SMA in early February. This is known as a dead cross. In addition to the cross, both moving averages are falling. The trend is clearly down when the average price over the last 200-day moving average is declining.

Figure 2 focuses on the head & shoulders pattern. The stock found support around 24 from January to early April. There was a spike high in February, and this formed the head. The consolidations on either side of the head form the shoulders. A break below neckline support would confirm the pattern and target further weakness to around 20. The high of the right shoulder marks resistance and a break above this level would negate the pattern.

FIGURE 2: JNPR, DAILY. In the head & shoulder pattern seen here, the stock found support around 24 form January to early April with a spike high in February, forming the head.

Graphic provided by: TeleChart2007.

Relative weakness and on-balance volume (OBV) point to a support break. The red indicator shows the performance of Juniper relative to the Standard & Poor's 500. This indicator broke to new lows in early April, and this shows relative weakness. The blue indicator shows OBV moving to a new low in March. Volume often precedes price and the new low in OBV confirms selling pressure.

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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HEAD & SHOULDERS

Relative Weakness For Juniper

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