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Nokia Breaks Triangle Resistance On Good Volume

05/09/05 08:34:37 AM
by Arthur Hill

In another positive sign for tech stocks, Nokia gapped up on good volume and broke triangle resistance to signal a continuation higher.

Security:   NOK
Position:   Accumulate

Nokia (NOK) has gone from leader to laggard and back to leader. The stock led the broader market from mid-August 2004 until late November with a surge from 11 to 17. While the broader market continued higher in December, Nokia started lower and declined into January. As the price relative shows, the stock was underperforming at this point. However, NOK managed to hold above its January low in April and start outperforming. The price relative moved to a new high in early May, making Nokia one of the stronger stocks.

Turning to the price chart (Figure 1), we can see a large triangle that extends from December 2004 to April 2005. This pattern marks a large consolidation after the August-November advance. There was a gap up in January and another in April. Both gaps occurred on high volume, and the second led to a triangle breakout. The breakout and new reaction high are bullish and call for higher prices over the next few weeks.

Figure 1: Nokia. Turning to the price chart, we can see a large triangle that extends from December 2004 to April 2005.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
The upside target is around 19 and there are two methods for projection. First, the width of the triangle is added to the breakout (16.7 - 13.8 = 2.9, 16.4 + 2.9 = 19.3). Second, a trendline can be drawn parallel to the lower triangle trendline. The gray trendline creates a price channel and extends to around 19.2. Both targets converge just above 19, but it doesn't always work out like this.



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.

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Date: 05/09/05Rank: 4Comment: 
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