Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

WEDGE FORMATIONS


Memc Electronic Hits Wedge Support

04/30/08 09:53:56 AM
by Arthur Hill

Memc Electronic is consolidating after a support break, but relative weakness and a potentially bearish pattern could spell further weakness.

Security:   WFR
Position:   Sell

For some perspective, Figure 1 shows Memc Electronis (WFR) over the last five months. The stock declined sharply in December-January, rebounded with a rising wedge from January to March, and then declined sharply at the end of March. This decline broke rising wedge support and the stock consolidated after the trendline break.

FIGURE 1: WFR, DAILY. This stock declined sharply in December 2007–January 2008, rebounded with a rising wedge from January to March and then declined sharply at the end of March.
Graphic provided by: TeleChart2007.
 
The rising wedge is typical for corrective or countertrend rallies. Even though the stock overshot the 62% retracement on the advance, it did not reach the December high and formed a lower high. A downtrend starts with a lower high and the wedge break is looking rather ominous.

Figure 2 focuses on the wedge break and consolidation. After the sharp decline in late March, WFR rebounded with a smaller rising wedge. The rebound is quite flat and looks like a consolidation after the decline. WFR traded down to the lower trendline and a break below the mid-April low would be bearish. This would signal a continuation lower and target a move toward the January low around 62.

FIGURE 2: WFR, DAILY. After the sharp decline in late March, WFR rebounded with a smaller rising wedge.
Graphic provided by: TeleChart2007.
 
For indicators, I am showing the Bollinger bands and price relative. The Bollinger bands contracted over the last few days and this volatility contraction often leads to a volatility expansion. Bollinger bands do not provide directional clues so we must turn to other indicators. The price relative compares the performance of WFR to the NASDAQ 100 ETF. I choose QQQQ because WFR is a big semiconductor stock. The price relative already broke below its March-April lows and this shows relative weakness. WFR is not keeping up with other large-cap techs and this is negative.



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

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.