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First Commonwealth Financial

01/07/13 12:34:53 PM
by Koos van der Merwe

Whenever I see a double bottom followed by a triple top on a weekly chart, I always examine the stock more closely.

Security:   FCF
Position:   Sell

First Commonwealth Financial (FCF) is a financial services company. It is one of the few stronger banks that did not accept TARP funds in 2008, yet from a high of $15.89 in 2004, the share price collapsed with all banks to a low of $4.09 by November 2009. What attracted me to the share is the double bottom that formed, as can be seen in Figure 1.

FIGURE 1: FCF, WEEKLY
Graphic provided by: AdvancedGET.
 
Figure 1 is a weekly chart of FCF and shows the following:

1. A double bottom formed between November 2009 and October 2011.
2. The price rose from that double bottom, breaking the trendline X after testing it to retest the April 2010 level of $7.69. This formed the resistance line Y.
3. With the share price testing the X trendline, should it start falling, the possibility of a head & shoulders formation exists as shown on the chart. Should this formation occur, then the price could fall to test the Y support line at $4.01 (7.69 - 5.85 = 1.84. 5.85 - 1.84 = 4.01).
4. Should the price break above the X resistance line, it will test the resistance of Y at $7.69.
5. Note the double top that has formed between April 2010 and September 2012. This is a very negative formation.
6. The relative strength index (RSI) has not fallen into the buy zone and suggests that the share price will fall.


FIGURE 2: FCF, DAILY
Graphic provided by: AdvancedGET.
 
The daily chart in Figure 2 does show the head & shoulders pattern that could be forming in the weekly chart. The chart shows an Elliott wave count suggesting that a B wave correction is a possibility, with the share price falling into a C wave correction. The RSI, which has not quite reached the sell zone, is suggesting possible negativity. However, as I have shown with a question mark, the B wave could very well be a wave 1 to be followed by a wave 2. The fiscal cliff uncertainty is suggesting a fall in the share price. Whether this will be a C wave or a wave 2 correction will resolve itself with time. Whatever happens fundamentally, a correction is on the cards.

At the moment, with uncertainty in the US economy -- politics taking precedence over the benefit to the general citizen -- stocks appear to be trading the new. This is scary. I would be wary of investing in the stock at the moment. However, the stock is on my watchlist.




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.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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