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ASCENDING TRIANGLES


ACS Signals Continuation Higher

11/30/04 09:50:19 AM
by Arthur Hill

After a long bullish consolidation, Affiliated Computer (ACS) broke above resistance to signal a resumption of its long-term uptrend.

Security:   ACS
Position:   Buy

ACS is a rather strange bird. While most stocks declined in 2000 and 2001, ACS mounted a sustained advance and managed to triple in price. This negative correlation continued when the broad market bottomed in October 2002 and advanced over the last two years. Even though ACS did not decline, the stock traded relatively flat during this period and did not partake in the broad market advance.

However, a recent breakout suggests that ACS is prepared to resume its advancing ways. The stock formed an ascending triangle, which is a bullish continuation pattern. The higher lows show buying pressure at higher and higher levels (green arrows). The equal highs reflect overhead resistance or supply around 58 (red arrows). The breakout to new highs is a victory for demand over supply and opens the door to further gains. Using traditional technical analysis, the upside projection is to around 77. The length of the pattern (19) is added to the breakout (58) to project a target.

Figure 1: ACS. After a long bullish consolidation, Affiliated Computer (ACS) broke above resistance to signal a resumption of its long-term uptrend.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
Momentum confirms strength and should be watched for signs of failure. The percentage price oscillator (PPO) is just like the moving average convergence/divergence (MACD), but it measures percentage difference between two moving averages as opposed to the absolute difference. The PPO also sports a series of higher lows over the last few years and has been working its way higher the last few months. As long as the signal line and green trendline hold, momentum is considered bullish. A move below the signal line and green trendline would show momentum breakdown and put the price breakout in jeopardy.



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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Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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