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WEDGE FORMATIONS


Air Products Breaks Wedge Trendline

09/03/08 09:06:29 AM
by Arthur Hill

After meeting resistance from two key moving averages, Air Products broke a rising wedge trendline and appears to be set to continue lower.

Security:   APD
Position:   Sell

Figure 1 shows daily candlesticks over the last four months. Air Products (APD) broke support around 94 with a sharp decline in late July and early August. A rally in August carried APD back to broken support and two key moving averages, where it met resistance. The convergence of the 50-day simple moving average (SMA), 200-day SMA, and broken support marks a major resistance level around 94.

FIGURE 1: APD, DAILY. Air Products broke support around 94 with a sharp decline in late July and early August.
Graphic provided by: TeleChart2007.
 
The pattern over the last few weeks is a rising wedge, and this pattern is typical for corrective rallies in larger downtrends. The stock became oversold after the sharp decline to the early August lows. With a bounce back to broken support, the rising wedge alleviated these oversold conditions. Two black candlesticks formed over the last two days, with the second one breaking the wedge trendline. This reinforces resistance, and APD looks ripe for a continuation lower.

Figure 2 shows weekly prices and a massive double top. The stock formed two highs around 105 with an intermittent low around 80. This low around 80 marks the next support level and the downside target for the rising wedge break.

FIGURE 2: APD, WEEKLY. Note the massive double top here.
Graphic provided by: TeleChart2007.
 
There are potential double tops until confirmed by a support break. A move below the January low would confirm this double top and project further weakness toward 55. The height of the pattern (105 - 80 = 25) is subtracted from the support break for a downside target (80 - 25 = 55). APD is a ways from breaking double-top support, but it is something to keep in mind over the next few weeks and months.



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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Date: 09/04/08Rank: 5Comment: 
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