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Air Products Hits An Air Pocket

06/27/08 08:28:25 AM
by Arthur Hill

After hitting long-term resistance, Air Products suffered a momentum reversal and trendline break that point to weakness in the coming weeks.

Security:   APD
Position:   Sell

Figure 1 shows weekly prices for Air Products (APD). The stock met resistance around 105 in December 2007, declined to the 80–85 region in January 2008 and then moved back to resistance in June. APD stalled the first three weeks of the month and then declined sharply with a long black candlestick below 100. It looks like resistance is going to hold.

FIGURE 1: APD, WEEKLY. The stock met resistance around 105 in December, then declined to the 80 to 85 region in January.
Graphic provided by: MetaStock.
 
The next support level is around 80–85 from the August 2007, January 2008, and March 2008 lows. I elected to ignore the spike below 80 in August because the stock established support around 85 on either side of the spike (blue arrows). With the stock recovering the same weeks, the spike looks like an overshoot.

Figure 2 shows APD with daily candlesticks. The stock formed an inside day or harami in early June. These are bearish candlestick reversals that require confirmation. The stock declined to 100, but bounced off trendline support in mid-June. This bounce did not last, as the stock declined below 100 with a high-volume move on June 27. In fact, note that downside volume has been high three of the last four days. Selling pressure is picking up and the harami has been confirmed.

FIGURE 2: APD, DAILY. The stock formed an inside day or harami in early June.
Graphic provided by: MetaStock.
 
In addition to increased selling pressure, momentum broke down as the relative strength index (RSI) moved below its support zone. The stock advanced from early March until June. During this time, the 15-day RSI broke above 50 in mid-March and held the 45–50 support zone. Momentum favored the bulls as long as this support zone held. The RSI broke the support zone and momentum now favors the bears. The next support area is around 80–85 and this is the first target.



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
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