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by Chaitali Mohile
A strong bullish rally of Mayers Industry has breached a moving average resistance. The stock is consolidating at a newly formed support.
Position: N/A
Chaitali Mohile
Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.
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CONSOLID FORMATION
Mayers Industry Is Gearing Up
05/01/09 02:28:15 PMby Chaitali Mohile
A strong bullish rally of Mayers Industry has breached a moving average resistance. The stock is consolidating at a newly formed support.
Position: N/A
| For most stocks and many indexes, March 2009 was an extremely bullish month. The most-awaited bullish run with positive sentiment was witnessed by the financial markets across the globe. Mayers Industry (MYE) followed suit. MYE surged to $8 from the lower levels of $2.75. The rally breached the 200-day moving average (MA) resistance with high volume (see Figure 1). The average directional movement index (ADX) (14) was at its peak in early March, indicating an overheated downtrend. The long-term downtrend reversed with this fresh upside move. An uptrend turned stronger as the 200-day MA support was established. |
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| FIGURE 1: MYE, DAILY. After every higher level, MYE moved sideways for a few sessions and accumulated strength for a future rally. The small horizontal lines show the sideways consolidation. The 200-day MA is a strong bullish support of the rally. |
| Graphic provided by: StockCharts.com. |
| |
| The moving average convergence/divergence (MACD) surged into positive territory, indicating positive momentum in the rally. The relative strength index (RSI) (14) moved above 50 levels and remained range-bound between the 50 and 70 level. The ADX (14) in Figure 1 is descending from overheated uptrend levels. This technical scenario resulted in bullish consolidation with the 200-day MA support. Under these healthy bullish conditions, MYE would sustain above the fresh MA support and accumulate the strength for the future bullish rally. The daily chart in Figure 1 does not reveal any bearish signs that might harm the current consolidation, so MYE's bullish breakout is under way. Fresh long positions can be triggered at the breakout level. The stock would retrace to the 200-day MA support if the financial markets enter any volatile sessions. |
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| FIGURE 2: MYE, WEEKLY. The 50-day MA is a new support for the rally. MYE is likely to consolidate at this new support. |
| Graphic provided by: StockCharts.com. |
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| In the weekly time frame, the 50-day moving average (MA) was the strong resistance for MYE. Earlier, in November 2007, MYE plunged to lower levels under the 50-day MA, forming lower highs. In September 2008, the same resistance was challenged, but due to robust bearish strength, MYE failed to violate the resistance. In addition, the downtrend was redeveloped while the price was retesting the MA resistance. However, the RSI (14) formed higher highs in the bullish areas. In Figure 2, we can see that the length of the bullish rallies was shorter than the bearish rallies in the past. The RSI (14) sustained its momentum at the 30 level, the MACD (12,26,9) turned positive after the bullish crossover, and the ADX (14) began descending from overheated downtrend levels. This generated bullish momentum, initiating a strong upside rally. |
| The price action that began in March gradually violated the previous high resistance and reached the tough 50- day MA. The length of this upside rally was larger than the previous ones, and was filled with bullish strength. This helped the stock to convert historical resistance to support. Although MYE has formed a lower high, the rally is well supported by the positive indicators in Figure 2. As a result, the stock is likely to sustain at the new 50-day MA support. |
| Thus, MYE shows the possibility of bullish consolidation for a few more trading sessions. According to the weekly time frame, the 200-day MA resistance can be observed as a potential target for the breakout rally after the consolidation. |
Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.
| Company: | Independent |
| Address: | C1/3 Parth Indraprasth Towers. Vastrapur |
| Ahmedabad, Guj 380015 | |
| E-mail address: | chaitalimohile@yahoo.co.in |
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Date: 05/03/09Rank: 2Comment:
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