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TECHNICAL ANALYSIS


Bowne & Co. Comes Out Roaring

04/18/07 01:33:50 PM
by Chaitali Mohile

BNE moves out of a long consolidation period with a huge increase in volume. Will this breakout lead to a bullish rally?

Security:   BNE
Position:   Buy

Bowne & Co. (BNE) appears to be a strong but slow-moving stock. It consolidated for almost six months after its rally from $13 to $15.50. During this phase, the lower pivot was taken, indicating its bullish strength. Figure 1 shows high volatility in volume during consolidation, showing that high-risk trading was performed from a low range of $15 to $16.50.

FIGURE 1: BNE, DAILY. The stock is ready for a bullish rally by breaking through the upper range of consolidation.
Graphic provided by: StockCharts.com.
 
Relative strength index (RSI)(14) moved close to the 50 level in a tight range during the consolidation. The RSI (14) crossed below the 50 level while the price also tried to break down through its lower range. Recovering faster, the RSI gave birth to a bullish rally, moving above 50. This made a price break through its upper range at $16.25. Volume increased with the breakout of consolidation.

Average directional movement index (ADX)(14) at 20 shows a developing bullish trend. The moment that the price broke out, the positive directional index (+DI) moved vertically to 33 and the negative directional index (-DI) to 11.

FIGURE 2: BNE, WEEKLY. The price moves above its previous high with the support of a 50-day moving average.
Graphic provided by: StockCharts.com.
 
On Figure 2, the weekly chart also shows a long consolidation phase. Here, the lower end of consolidation was supported by a 50-day moving average. The price moved above its previous high with the support of a 50-day moving average. This provided more strength to the bullish rally. The RSI (14) also broke out of its consolidation range, creating new buying opportunities. The ADX (14) at 15 indicates a developing bullish trend.

As a result, traders and investor can go long with a target of $19. The length of consolidation ($16.50 - $14) $2.50 is added to $16.50.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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