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CHART ANALYSIS


Schwab Looking For Volume

09/16/04 01:33:17 PM
by Arthur Hill

After a big move in August, Schwab finds itself with a nice reversal pattern in search of volume for confirmation.

Security:   SCH
Position:   Hold

Starting with the weekly chart for some perspective, we can see that Schwab (SCH) declined more like a high-priced tech stock than a broker. While the S&P 500 has traded in a relatively flat pattern for the last eight to nine months, Schwab was knocked all the way back to its May 2003 lows (red arrow).

Figure 1: Weekly chart of Schwab.
Graphic provided by: MetaStock.
 
The decline looks like a falling wedge and the stock managed to stabilize above 8 this summer. The long white candlestick in August broke above the upper trendline, but we have yet to see follow through to this late summer pop.


Figure 2: Daily chart of Schwab.

Turning to the daily chart, the pattern from June to September looks like an inverse head and shoulders. The left shoulder formed in June, the head in July/August and the right shoulder is currently under construction. Also notice that broken resistance just above 9 turned into support for the left shoulder (green line).

This head and shoulders pattern and volume hold the key. The July decline occurred on high volume and the stock then consolidated on low volume to form the head. The August advance featured two days of above average volume (green arrows), but nothing near the levels seen in July. For this pattern to be considered robust, volume needs to expand on any move towards the neckline and/or on any neckline breakout. A neckline breakout on above average volume would be bullish for both the weekly and daily chart with the first target around 12.



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
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Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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