Myriad Genetics Holds Key Retracement

10/21/08 08:45:38 AM

by Arthur Hill

After finding support near a key retracement, Myriad Genetics surged above its 50-day and triggered an impressive breakout.

Security: MYGN
Position: Accumulate

On the price chart (Figure 1), Myriad Genetics (MYGN) found support near its 62% retracement and 200-day moving average in October. After an advance from 45 to 67, the stock declined to the lows 50s and retraced 62% of the advance. Alone, the 62% retracement is not enough reason to expect support. In addition to this key retracement, the rising 200-day moving average also marks support around 53 to 54. The combination of the two served as an alert for potential support in this area.

In addition to support, the stock showed relative strength throughout September and into October. Even though MYRD declined with the rest of the market in September, it held up better than the overall market (SPY). This is evident by the steady rise in the relative strength comparative (red line). Relative strength in the face of market weakness is quite positive and this reinforces the recent breakout.

FIGURE 1: MYGN, DAILY. Myriad Genetics stock found support near its 62% retracement level and 200-day moving average in October.

Graphic provided by: TeleChart2007.

Back to the price chart, the decline over the last few weeks formed a sharp falling flag and the stock broke flag resistance with a big surge over the last four days. This surge features two long white candlesticks over the last four days. The current long white candlestick is still a work in progress because this is being written before the close on October 21.

The relative strength index (RSI) holds the final piece of the bull puzzle. Momentum has been trending lower since mid-July and the RSI surged to the blue trendline over the last few days. A break above this trendline and above 50 would turn the RSI (momentum) bullish. This would further affirm the breakout on the price chart and argue for higher 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.

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Myriad Genetics Holds Key Retracement

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