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KLA - Tencor Corp. Poised For Breakout

11/10/03 08:46:27 AM
by Gary Grosschadl

KLAC is engaged in process monitoring systems for the semiconductor industry. They look ready to head higher.

Security:   KLAC (Nasdaq)
Position:   Buy

This daily chart shows a bullish stock rising in a large uptrending channel. In the last two weeks the stock has made a very bullish bounce off the lower trendline and has now closed just above a previous high on expanding volume.
The stock looks poised for an immediate breakout.

Let's examine several indicators to support this bullish premise. The trend strength indicator at the top of the chart shows a recent bullish DI crossover which coincided with the recent big advance. The strength component via the ADX line is just starting to rise and the ideal setup occurs when this ADX line is upsloping and between the DI lines with +DI (representing bullish power). From this stance, a rising ADX points to increasing bullish trend strength and this supports the breakout scenario.

KLAC's daily chart looks poised for a breakout.
Graphic provided by:
The rising MACD (moving average convergence/divergence) and rising RSI (relative strength index) also show a bullish picture. Note how previous bullish crossovers for the MACD led to substantial price movement. RSI heading north of its 50 level is often a key sign of strength. The CMF or Chaiken Money Flow indicator also shows ample buying power and this indicator is often a reliable sign of buying or selling power. The only indicator waving a caution flag is stochastics which is heading into overbought territory. A turn back down through the 80 level could indicate a reversal when it occurs.

The stock looks poised to strike higher especially with the overall bullish bias the past two trading sessions for the main indexes. Watch for a high volume breakout in the next trading session and some bullish follow through to add weight to this breakout potential.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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