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TRADING SYSTEMS


GILD Weak Relative Strength

04/27/10 09:55:26 AM
by Donald W. Pendergast, Jr.

Was today the top in the S&P 500? Who knows, but here's a look at one of the weaker large cap issues that looks ripe for further declines.

Security:   GILD
Position:   Sell

On April 21, 2010, shares of Gilead Sciences (GILD) gapped sharply lower by more than $3 per share, and the technical picture doesn't seem to suggest that the stock will be filling this gap anytime soon. As one of the weakest of all the Standard & Poor's 500 component stocks, GILD may bear further inspection, particularly since the Rahul Mohindar oscillator (RMO) trading system has just issued a swing sell signal for this stock. See Figure 1.

FIGURE 1: GILD, DAILY. A major breakaway gap along with poor money flows have combined to create a negative outlook for the near-term direction for shares of Gilead Sciences.
Graphic provided by: MetaStock.
Graphic provided by: CS Scientific Expert Advisor from MetaStock.
 
A simple chart, a Keltner band grid is overlaid across GILD's daily price action, and beneath that we see both the long term (100-day) and short-term (21-day) Chaikin money flow indicators. GILD is trading just a little above its extreme lower Keltner band (set at 7.5 standard deviations away from a 45-day exponential moving average [EMA]), and both money flow indicators are well below their respective zero lines. In addition, the CS Scientific Hybrid Trade Screen expert advisor is confirming that "short" ("+ S +" text in the yellow ribbon at bottom of the chart) is the most rational trade direction for GILD.

Of course, the key factor on this daily chart is that open gap (pink-shaded area on chart), which is the main indication that somebody really doesn't like this stock, judging by the way it was sold off so violently and abruptly last week.

If last week's low of $39.90 is taken out soon, there is little in the way of the previous chart's support & resistance (S&R) to keep GILD from falling down to the October 2008 lows of $35.60. This could be a great stock for nimble daytraders to short on 15- to 30-minute charts for as long as it hugs that lower Keltner band. Be sure to close out positions by the end of the day (if short) to avoid any nasty short squeeze surprises. It would also be a great help to see all of the major US stock indexes moving lower, as they are expected to do now for the next few weeks.



Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title: Writer, market consultant
Company: Linear Trading Systems LLC
Jacksonville, FL 32217
Phone # for sales: 904-239-9564
E-mail address: lineartradingsys@gmail.com

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