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CHART ANALYSIS


JOE Rallying On Weak Trend

01/14/13 11:05:09 AM
by Chaitali Mohile

St. Joe Corp. is trying to break out on weaker notes.

Security:   JOE
Position:   Hold

A converging range of St. Joe Corp. (JOE) shows a flag formation on the daily time frame chart in Figure 1. The series of higher highs and higher lows has formed the narrowing range for the stock. The long upper shadows show reluctance of the price rally to sustain at the intraday high.

The volatility and bearish pressure are equally high in JOE. All those red bearish candles reflect increasing selling pressure and weakness in Figure 1. The moving average convergence/divergence line (MACD) and the trigger line are moving at equal pace and the gap between them is very narrow. This suggested uncertainty and weak momentum in the stock.

The relative strength index (RSI) (14) has failed to surge in an overbought zone above 70 levels. The oscillator is stuck between the 50-70 bullish levels. The positive and negative directional index (+DI) (-DI) of the average directional index (ADX) (14) are converging frequently, indicating a volatile consolidation for JOE. In addition, the ADX line is below 20 levels, thus supporting the view of the sideways price rally.

The flag formation is a continuation of an existing rally. However, we cannot confirm this pattern as a bullish continuation, as the price rally and the three indicators are not highlighting any bullish signals.

FIGURE 1: JOE, DAILY
Graphic provided by: StockCharts.com.
 
Currently, JOE is plunging toward the lower ascending trendline support. This tricky range-bound price action is likely to continue till the indicators show strong bullish strength. Although the relative strength index (RSI)(14) and the moving average convergence/divergence (MACD) (12,26,9) are in bullish territory, they are not loaded with bullish force to drag the price rally higher.

FIGURE 2: JOE, MONTHLY
Graphic provided by: StockCharts.com.
 
Since a descending channel formation in Figure 2 is being constructed from 2006, it could undergo some major breakout. The descending channel is a bearish formation, so the selling pressure would be undoubtedly higher.

But the rally is not led by a downtrend. The ADX (14) has been consistently weak with equal buying and selling pressure. Hence, the stock moved within the two trendline resistance and support levels. Recently, JOE dared to move above the upper trendline resistance with no bullish support.

The struggling RSI (14) has to sustain above the 50 levels to mark a successful bullish breakout for JOE. The MACD (12,26,9) is jittery in negative territory, and the +DI has marginally raised above the -DI. These directionless indicators would not pull JOE above the resistance line in the next few trading sessions. If at all this bullish breakout converts the upper trendline resistance to support, the 200-day moving average (MA) resistance would restrict the breakout rally. Therefore, traders can hold their short positions with a breakeven stop-loss. No fresh positions either long or short are advisable.

JOE is likely to move downward on these weaker notes.





Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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