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UPS Forms Bearish Failure Swing

08/19/04 01:20:45 PM
by Arthur Hill

UPS has been one of the top market performers, but waning volume and momentum could foreshadow a reversal.

Security:   UPS
Position:   N/A

The price pattern at work looks like a double top. The stock met resistance at 75 twice with a reaction high in Dec-03 and another in Jun-04. The second high was just higher than the first. As a double top, the intermittent low at 67.51 holds the key and a move below this level would confirm the pattern. The projected decline (7.78 points) would be to around 61, an area confirmed by extending the Sep-01 trendline and the support line extending back to May-03.

Graphic provided by: MetaStock.
There was less upside momentum on the second high as the RSI formed a bearish failure swing. The RSI became overbought (above 70) in Jul-03 and Dec-03 when the first reaction high formed. While UPS moved to a new reaction high at 75.29, the RSI failed to exceed its prior high. This formed a bearish divergence and the subsequent decline below the prior low (gray arrow) completed a bearish failure swing. This is essentially an RSI sell signal.

In addition to decreasing upside momentum, volume was light on the last advance. After a consolidation in 2003 (gray oval), UPS shot higher on expanding volume (green arrow). Notice that weekly volume levels were above the 52-week moving average. During the second assault on 75, volume levels remained below the 52-week moving average and this reflects less buying pressure (red arrow).

Arthur Hill

Arthur Hill is currently editor of, 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 and the main contributor to the ChartSchool.

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Date: 08/24/04Rank: 4Comment: 

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