For Analog Devices, All Systems Go?

08/31/11 08:38:39 AM

by Donald W. Pendergast, Jr.

Here it comes -- a significant trend reversal in the broad markets. Will Analog Devices join in the rally?

Security: ADI
Position: Buy

It seems to happen all the time: Markets plunge for one reason or another, eventually finding support, bouncing higher, retesting the lows, then rallying higher, almost as if the panic associated with the plunge never happened in the first place. One stock that is looking mighty healthy right now is Analog Devices (ADI). Its Raff MarketSpace Stock System buy signal comes right as the stock completed a textbook-quality bullish breakout that further solidifies an already impressive series of post-crash higher swing highs and higher swing lows. Figure 1 is a closer look.

FIGURE 1: ADI, DAILY. This looks like one egg that's about to crack wide open, allowing shares of ADI to reclaim at least a portion of the losses incurred since mid-May 2011.

Graphic provided by: MetaStock.

Graphic provided by: Raff MarketSpace Stock System from MetaStock 11.

The Raff MarketSpace Stock system comes as a standard expert advisor template in MetaStock 11, allowing you to use it (and its associated scan feature in the MetaStock Explorer) on any tradable security you desire. Judging from the number of long buy signals generated by this expert on Monday, August 29, 2011, we are indeed seeing a substantial bullish trend reversal begin to take root in the broad markets, across every stock market sector.

ADI's new Raff buy signal has printed on the daily chart in conjunction with a bullish breakout above the last swing high, thus giving a truly bullish feel to this new signal. The circled area really has all of the essential information that any serious swing or trend-following trader needs to be aware of:

1. The stock is in a de facto uptrend (a series of higher swing highs and higher swing lows)
2. The uptrend is gaining momentum, as the break higher confirms, even as a very powerful trading system suggests that the right place to be in ADI right now is on the long side. Long-term money flow (not shown) is also supportive of further potential rises, making a shot on the long side here a fairly low-risk proposition. Conservative traders may wish to seek out any number of covered call (also known as "buy-write") opportunities, just in case this rally is destined to have some real staying power as we head into the last few trading months of the year. Aggressive swing traders may want to enter on a modest intraday pullback, looking to ride this break higher as they rely on a two- to three-bar trailing stop of the daily lows to take them out of the trade.

With so many bullish buy signals across systems in every sector, skilled traders should have little trouble locating powerful and potentially profitable trade setups to rely on over the next few weeks. Trade wisely and make the most of this major trend reversal.

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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For Analog Devices, All Systems Go?

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