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ASCENDING TRIANGLES


A Bullish Pattern For ExxonMobil

07/05/06 08:25:09 AM
by Arthur Hill

After a stellar run in 2004, ExxonMobil began a long consolidation period that traced out a bullish ascending triangle.

Security:   XOM
Position:   Accumulate

Ascending triangles are bullish continuation patterns. This means that an uptrend precedes these patterns and a breakout signals a continuation of that uptrend. ExxonMobil (XOM) advanced from late 2003 until early 2005 and then consolidated between 66 and 52.5 over the next 18 months (Figure 1). This consolidation represents a rest after the long advance and a resistance break would signal that the rest was over.

FIGURE 1: XOM. ExxonMobil advanced from late 2003 to early 2005 and then consolidated the next 18 months.
Graphic provided by: MetaStock.
Graphic provided by: MS Quotecenter.
 
As its name implies, the ascending triangle forms with a series of equal highs and higher lows. The three reaction highs (gray arrows) are not exactly equal, but they are close enough that I marked key resistance at 65. The rising lows (higher lows) over the last 15 months show that buyers are stepping in quicker and quicker. Resistance at 65 represents a supply overhang that the bulls must break through to clear the way to new highs. A break above 65 would project further strength to around 77.5 (blue line).

The price relative has also been in consolidation mode the last 18 months. The price relative compares the performance of XOM to the Standard & Poor's 500. It peaked in early 2005 and bottomed in late 2005. Since December 2005, the price relative has been working its way higher and XOM has outperformed the S&P 500 in 2006 (magenta trendline). I find this positive and think this increases the chances of an upside breakout. Should the price relative break below its March 2006 low and XOM break below its June 2006 low, this would void my bullish prognosis.



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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