Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

FLAGS AND PENNANTS


IBM Forms Yet Another Rising Flag

08/05/04 09:27:34 AM
by Arthur Hill

IBM remains in a downtrend punctuated by rising flags and the stock looks ripe for yet another continuation lower.

Security:   IBM
Position:   N/A

IBM led the overall market lower with a steady decline that began in mid-February. The decline was interspersed with a series of retracements that amounted to small corrective rallies or rising flags. The first flag retraced 38% of the prior decline, the second flag retraced 62% and the third flag has thus far retraced 50%. As this chart proves the rising flag is a bearish continuation pattern and that represents a reprieve in the ongoing trend.

Graphic provided by: MetaStock.
 
The current flag looks just as robust as the first two and RSI is turning bearish again. The 14-period RSI reached oversold (below 30) with each flag low and moved above 50 with each flag advance (gray arrows). It was possible to draw a trendline extending up from the RSI lows and look for a break to confirm a change in momentum. When RSI broke below the red trendline and below 50, momentum turned back to the bears and the stock continued lower. RSI generated a similar sell signal in early August.

A move below the lower flag trendline (85.3) would provide final confirmation and project further weakness to around 80. Flags are said to fly at half-mast and the decline extended from 91.21 to 83.42, a difference of 7.79. This implies that a continuation lower would result in a similar decline from the flag high (87.42 - 7.79 = 79.61). Traders should watch the flag high (87.4) and the trendline extending down from Feb-02 for signs to the contrary (i.e. bullish).



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 08/11/04Rank: 4Comment: 
PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2021 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.