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CHART ANALYSIS


Sycamore Networks Has Seen the Light

07/14/03 10:27:07 AM
by Andrew Hetherington

Like so many other stocks, Sycamore Networks (SCMR) has bottomed out. A 7-month bottom reversal-ascending triangle has formed on their daily chart with perfect volume on the creation of the pattern.

Security:   SCMR
Position:   N/A


Figure 1: Daily chart of Sycamore Networks.

Sycamore's breakout came in May through the resistance in the $3.45 area. There was the customary throwback to the buy point along the support at $3.45 and this was the best time to take a long position. If an opportunity presents itself and this equity comes off of its recent high of $4.80 down towards the support line of $3.45, it will be an excellent medium to long-term hold. The all-time low on this equity is $2.20 touched back in September of 2002, and we aren't that far off of the bottom to take a risk if we see a throwback.

The increased volume on this rally since the breakout illustrates the underlying strength of this equity. The volumes are steadily increasing accompanied with higher highs in price. This is a signal technicians like to see. It takes money to move equities higher but they can fall on their own weight. Investors sell for a variety of reasons but they all buy for the same reason-- the potential of higher prices.

Figure 2: Weekly chart of Sycamore Networks.
Graphic provided by: SuperCharts.
 
Looking at the bigger picture I see a rounding bottom or rounding turn. The price movement and the volume have the same concave shape. Of course, I can't anticipate this equity to go back as high as it once was, however, higher prices compared to the bottom are likely. Down the road a price of $6.25 medium-term and much later $12.00 is a possibility.



Andrew Hetherington

Classic Dow Theorist who trades as a pure technician, using pattern recognition.

Toronto, Canada

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