|This article isn't going to give a general buy or sell signal but will rather attempt to alert traders to the deteriorating money flow situation in shares of Allergan (AGN), a fairly large player in the pharmaceuticals industry group. First off, the stock is in a very strong technical posture, what with its latest triple-top buy setup already in place and strong up swing move from the August lows still going strong. However, astute technicians will want to take note of the steadily declining long-term money flow histogram (bottom of the chart), which is based on the 100-day Chaikin money flow. |
Note how the histogram made a lower high each time that the price of the stock made a new swing high (at points 1, 2, and 3 on the chart). This is an early warning of sorts that the big money interests (mutual funds, and so on) are gradually paring back their exposure to AGN. Without the ongoing support of such institutions, it's going to be difficult for the stock to make much headway, even if there is a successful break above the swing high at point 3 on the chart.
A failure of the triple top buy setup would probably mean at the very least a trip down toward the red dashed uptrend line (near $83 or so), if not all the way down toward significant chart support between $77 and $79 (blue shaded area on Figure 1). In some cases, a failure swing opens up the door for a major reversal, so be on guard against that if you are already long shares of AGN. Forewarned is forearmed, as the old saying goes, and in the case of this particular chart, that might be very timely advice.
|FIGURE 1: AGN, DAILY. A triple-top buy setup can be a very exciting prospect for bulls, but always be sure to take a look at the longer-term money flow trend before committing funds to a stock offering such a setup.|
|Graphic provided by: MetaStock.|
|Title:||Writer, market consultant|
|Company:||Linear Trading Systems LLC|
|Jacksonville, FL 32217|
|Phone # for sales:||904-239-9564|
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