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Agilent Rests After Gap

09/20/06 08:46:38 AM
by Arthur Hill

Agilent surged in mid-August and looks poised to continue higher after a bullish consolidation.

Security:   A
Position:   Accumulate

On the price chart (Figure 1), the stock gapped above 30 with a big move in mid-August and then began a consolidation that has lasted a month. The pattern looks like a flat flag (blue trendlines) and the subsequent break from pattern will provide the next signal. A move above the flag high would be bullish and a move below the flag low would be bearish. The mid-August gap is bullish and has yet to be filled. This gives the consolidation a bullish bias and increases the chances of an upside breakout.

FIGURE 1: AGILENT TECHNOLOGIES. This stock gapped above 30 with a move in mid-August and then began a consolidation.
Graphic provided by:
Graphic provided by: TeleChart 2007.
I have overlaid the Bollinger Bands on the price chart (magenta lines), and these lines are contracting. The gray line in the middle is the 20-day moving average and the magenta bands are two standard deviations above and below. The bands narrowed just before the mid-August breakout and are narrowing once again. The narrowing shows a period of contracting volatility, and this often precedes a period of expanding volatility.

The bottom indicators show the moving average convergence/divergence (MACD) and the MACD histogram. The MACD remains in positive territory and this shows that momentum is positive overall. However, MACD is trading below its signal line (magenta line) and needs to turn up for a bull signal. This is also reflected in the MACD histogram, which is in negative territory. The MACD histogram is formed by subtracting the MACD signal line from MACD. The histogram is positive when MACD is above its signal line and negative when MACD is below its signal line. I am looking for MACD to move back above its signal line (that is, the MACD histogram to turn positive) for a bullish signal.

Arthur Hill

Arthur Hill is currently editor of, 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 and the main contributor to the ChartSchool.

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Date: 09/23/06Rank: 5Comment: 

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