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ON BALANCE VOLUME


Comcast Holds The Gap

03/07/08 01:07:11 PM
by Arthur Hill

Comcast gapped up and broke one resistance level, but the stock stalled over the last two weeks and the on-balance volume is not promising.

Security:   CMCSA
Position:   Hold

Figure 1 shows Comcast (CMCSA) over the last 10 months. The stock peaked in July 2007 and trended lower from July to January 2008. The February 2008 surge broke above the July trendline and exceeded the 50-day moving average. In addition, this move broke above the January highs.

FIGURE 1: CMCSA, DAILY. The stock peaked in July and trended lower from July to January.
Graphic provided by: TeleChart2007.
 
It looks like a pretty good breakout, but still within a larger downtrend. First, the 50-day moving average remains below the 200-day moving average. Second, the 200-day moving average is falling. That means the average price over the last 200 days keeps getting lower. Third, the stock itself is still well below the 200-day moving average. This larger downtrend creates a strong headwind for upside breakouts.

Figure 2 focuses on the flag/pennant that formed after the surge. The stock became short-term overbought after the February surge and needed to alleviate this condition. A consolidation does the trick and a break above consolidation resistance would signal a continuation higher.

FIGURE 2: CMCSA, DAILY. This chart focuses on the flag/pennant that formed after the surge.
Graphic provided by: TeleChart2007.
 
While the flag/pennant is a continuation pattern, I would tread carefully because the bigger trend is down and on-balance volume (OBV) is showing some selling pressure. OBV moved sharply lower over the last five days and this shows some increase in selling pressure. I would rather see OBV flat or even continue higher. This dip in OBV is worrisome and a break below the late February low might be bearish for CMCSA.



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: 03/09/08Rank: 5Comment: 
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