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CHANNEL LINES


East West Consolidation

11/03/08 09:36:04 AM
by James Kupfer

Shares of East West Bancorp have been in a tight consolidation pattern since August. They may begin breaking out soon.

Security:   EWBC
Position:   Hold

East West Bancorp has been in a tight trading range since August 2008, when it broke out of its downward-sloping linear regression channel. Since then, it has survived intact while most other US equities have taken massive hits to their share value, especially in September and October.

EWBC's main trading range has been between $12 at the low end and $15.50 to $16. The stock also had a spike on September 18-19 due at least in part to the SEC's ban on short-selling of financial stocks. Even including that abnormal movement, the stock still closed below $18. See Figure 1.

FIGURE 1: EWBC, DAILY. Even though stochastics indicate the stock is overbought on a daily basis, any continued strength in the overall market could carry this to the $18 level or higher.
Graphic provided by: Wealth-lab.
 
In the last week or so, EWBC has been moving up nicely. On Friday, it closed above the first resistance level. Even though stochastics indicate the stock is overbought on a daily basis, any continued strength in the overall market could carry this to the $18 level or even higher. Given the duration of this basing pattern, this could well be the beginning of a longer-term breakout. This stock is definitely worth watching.



James Kupfer

Mr. Kupfer is a market professional and amateur stock market commentator. Disclosure: It is likely that Mr. Kupfer has or will enter a position in any security he writes about.


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