Imax Readies For A Breakout

05/22/08 08:22:47 AM

by Arthur Hill

IMAX Corp. sports a bullish continuation pattern, and signs of accumulation point to a breakout in the stock.

Security: IMAX
Position: Accumulate

Figure 1 shows IMAX Corp. (IMAX) with an ascending triangle formation. These are bullish continuation patterns that form in an uptrend. The stock surged in January and then consolidated from February to May. The January surge started the uptrend and the consolidation represents a rest after the surge.

The pattern features rising lows and relatively equal highs. The rising lows shows buying pressure at higher levels, while the equal highs represent resistance. A break above resistance would confirm the pattern and signal a continuation higher.

FIGURE 1: IMAX, DAILY. Note the ascending triangle formation, bullish continuation patterns that form in an uptrend.

Graphic provided by: TeleChart2007.

Volume and on-balance volume (OBV) show signs of accumulation and buying pressure. Volume is always an important part of any breakout. IMAX volume surged in May as the stock jumped toward resistance. This shows strong buying pressure needed to forge a breakout. The bottom indicator window shows OBV, which broke to a new high in early May, and volume is leading price.

FIGURE 2: IMAX, MONTHLY. The first upside target would be the resistance area around 11.

Graphic provided by: TeleChart2007.

For an upside target, the monthly chart provides perspective on the next resistance level (Figure 2). The highs from 2005 and 2006 established lots of resistance around 11. Therefore, the first upside target would be this resistance area.

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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Imax Readies For A Breakout

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