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RESISTANCE LINE


Arkansas Best Hits Resistance

04/10/08 08:54:10 AM
by Arthur Hill

Arkansas Best has been a top performer in 2008 so far, but resistance is at hand and a bearish candlestick reversal could spell lower prices ahead.

Security:   ABFS
Position:   Sell

Figure 1 shows Arkansas Best (ABFS) with weekly prices. The stock broke down in the second half of 2007 with a sharp decline and then recovered in 2008. This recovery retraced 50% of the prior decline. A countertrend rally or corrective rally is expected to retrace 38–62% of the prior decline; 50% is right in the middle and marks a good spot to expect resistance.

FIGURE 1: ABFS, WEEKLY. Arkansas Best broke down in the second half of 2007 with a sharp decline before recovering in 2008.
Graphic provided by: TeleChart2007.
 
In addition to this key retracement, ABFS is meeting resistance from broken support. This is a key tenet of technical analysis: broken support turns into resistance. The stock first hit resistance three weeks ago and formed a candlestick with a long upper shadow. This intraweek pullback affirms resistance.

Figure 2 shows daily prices focusing on candlesticks. The overall trend is up and the stock surged above 33 at the end of March. This surge was short-lived as a harami formed and the stock pulled back (blue box). There was another bounce in early April, but the stock formed a lower high and declined sharply two days ago. Trendline support is now under threat.

FIGURE 2: ABFS, DAILY. Here, the overall trend is up and the stock surged above 33 at the end of March.
Graphic provided by: TeleChart2007.
 
The bottom indicator shows the stochastic oscillator forming a lower high in April. This is not a negative divergence, but it does show waning upside momentum. Further weakness below the late March low would be bearish for momentum. Back to the price chart, a break below the late March low would reverse the three-month uptrend and call for lower prices.



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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Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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Date: 04/10/08Rank: 4Comment: 
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