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American Express (AXP) On The Slide

08/30/04 08:37:28 AM
by Andrew Hetherington

American Express, like so many other equities at this point, is getting ready to make a move downwards.

Security:   AXP
Position:   N/A

Graphic provided by: SuperCharts.
On the weekly chart you can clearly see the perfectly diminished volume on the descending triangle. This diminished volume from the left to the right is required in triangle formations. This triangle has a bearish tendency, however this cannot be your only influence in determining which direction it will break out. You must also consider the general market direction, which is currently short. In addition, you need to examine the entire chart, carefully looking for any indication of the future direction, such as light volume rallies. The medium trend, which is two years in the making, will be the final helpful indicator of the future direction and this line is in the $49.50 area. When this line breaks on the downside it will give the assurance for those with weak hearts.

My suggestion is to short this equity anywhere above the $50.00 area and as close to $51.00 as possible. The first day it does not make a higher high than the previous day is the correct day to short it. I would try the January 2005 put options with a strike price of $50.00 or $47.50. If the equity moves lower towards the bottom line in the $47.50 area and doesn't break down, then sell out your options at a small profit. If it does break out lower, then sell out on the hard drop and make a good profit, as was the case with Merck. As always, trading within the pattern is a higher risk but so is the potential reward.

Andrew Hetherington

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

Toronto, Canada

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Date: 09/01/04Rank: 5Comment: 

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