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An Old Dominion Freight Line Buy Signal?

05/21/12 09:04:38 AM
by Koos van der Merwe

Old Dominion Freight Line has given me an RSI buy signal. Should we buy the stock now?

Security:   ODFL
Position:   Accumulate

Forbes magazine called Old Dominion Freight Line (ODFL) one of the US's 100 most trustworthy companies (5/11/12), so at what price should we start buying it? To help us with that decision, we must look at both a weekly chart and a daily chart.

Graphic provided by: AdvancedGET.
In Figure 1, the weekly chart, I am suggesting that the pattern is in a wave IV Elliott wave correction. The bottom could be a wave a of an abc correction and the Fibonacci retracement is suggesting a 38.2% correction of the wave 5 rise of wave III at $41.14.

Now, the problem with this assumption is that the correction should be within the fourth wave of lesser degree, which means that the 50% retracement level of $38.59 looks more likely. The relative strength index (RSI), which is falling, is confirming this assumption. Finally, we must ask, is wave II a complicated or simple wave? Looking at it, it looks extremely complicated, which means that wave IV should be a simple correction, suggesting a simple move down to the 50% retracement level. Of course, it could fall to $36.03, the 68.2% level, so we would watch to see if it holds at $38.59.

Graphic provided by: AdvancedGET.
The daily chart in Figure 2 has the RSI suggesting a buy. The Elliott wave count on the chart is suggesting the completion of a wave 4 correction, and a rise into wave 5; however, the 38.2% correction of $40.95 has not been reached, which puts doubt in our minds. In addition, the XTL trend indicator, where the color of the candlestick is still red, is also suggesting that it is not yet time to buy.

Investors could wait until the price breaks above the upper JM internal band line.

Old Dominion Freight Line is definitely a share that should be on our watchlist for a future buy.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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