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ASCENDING TRIANGLES


Semtech (SMTC) Is Moving Higher

10/14/03 09:39:16 AM
by Andrew Hetherington

A strong breakout indicates a good buying opportunity for Semtech. How far will it go?

Security:   SMTC
Position:   Buy

Figure 1: The daily chart of SMTC.
Graphic provided by: SuperCharts.
 
Semtech's daily chart shows a large 1-year ascending triangle. This pattern has nicely diminished volume on its creation. Interestingly, there is a clear early warning of accumulation with the increased activity in June and July of 2003. Some would hypothesize that the volume increase distorts the triangle volume requirements since it doesn't diminish towards the end of the triangle. This would have been correct had it broken the bottom line of the triangle. However, the trendline on the bottom of the triangle held in June of 2003 then it jumped off of the trendline and had a throwback down to the buy point in the $15.25 area in July.


Figure 2: SMTC's weekly chart.

The weekly chart demonstrates the strong breakout from $18.00 to $22.00 in August on much higher volume. The usual throwback to the buy point in the $18.50 area ensued and now it will be onward and upward as long as the general market conditions remain strong. There is less risk associated with this pattern now that it has confirmed by breaking topside. Trading off of the bottom trendline in the $15.25 area had a higher degree of risk but would have proven to be a protected and profitable position. Naturally, if the bottom trendline were broken you would sell your long position.

The anticipated resistance areas are in the $22.00, $29.00 and $40.00 areas. It's a reasonable prognostication to anticipate $29.00 - $40.00 with this bottom reversal triangle.



Andrew Hetherington

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

Toronto, Canada

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Date: 10/22/03Rank: 5Comment: 
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