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CANDLESTICK CHARTING


AllTel Attempts Reversal

06/22/06 08:19:20 AM
by Arthur Hill

After a decline in May and June, AllTel formed a bullish engulfing at support, which could mark the beginning of a new upswing.

Security:   AT
Position:   Accumulate

First, let's review the support zone on the weekly chart (Figure 1). The stock broke resistance at 60.62 in July 2005 and moved above 67. A trading range then ensued and the stock has been oscillating between 58 and 68 for about a year. Broken resistance and the reaction lows of the last 12 months formed a support zone between 58 and 61. The stock moved into this support zone for the fourth time in 12 months and firmed around 60 over the last two weeks.

FIGURE 1: ALLTEL, WEEKLY. The stock moved into a support zone for the fourth time in 12 months and firmed around 60 over the last two weeks.
Graphic provided by: MetaStock.
Graphic provided by: MS QuoteCenter.
 
Turning to the daily chart (Figure 2) for some magnification, we can see that the stock formed a bullish engulfing at support. In addition, this engulfing pattern occurred on above-average volume, and this is the second long white candlestick in as many weeks. AllTel (AT) is trying to forge a bottom here, but a full reversal is not quite there yet.

FIGURE 2: ALLTEL, DAILY. Here we can see that the stock formed a bullish engulfing at support.
Graphic provided by: MetaStock.
Graphic provided by: MS Quotecenter.
 
The bullish engulfing requires confirmation and the stock has been declining since March. AT needs to break above 62.5 to clear last week's high and the May trendline. This would be enough to turn the current swing up and expect another resistance test around 68.

I am also cueing off the commodity channel index (CCI) for a momentum breakout. This indicator has been trending lower since February, and there is a nice trendline extending down from the mid-February high. A break above this trendline and the June highs would turn CCI positive and momentum would then be bullish. This signal could be used to confirm a breakout in the stock.



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
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Date: 06/25/06Rank: 4Comment: 
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